Representations and Warranties Insurance Policies – Lessons from the Claims Process -
Representations and warranties insurance policies (R&WI Policies)—designed to protect parties from loss arising from breaches of representations and warranties in corporate deals—are not a new phenomenon; they were introduced in the marketplace over 15 years ago. But the popularity of R&WI Policies has expanded dramatically in recent years and, with it, the frequency of claims submitted under such policies. The growing volume of claims experience under R&WI Policies has confirmed their significant value to acquiring and selling businesses alike. That experience also has revealed, however, certain key lessons that companies shopping for or making claims under R&WI Policies should keep in mind throughout the process.
Background -
First offered in 1999, R&WI Policies are generally intended to provide coverage for breaches of representations and warranties made by the seller (or acquired entity) in a purchase agreement. These policies serve as either a supplement to, or in some instances a substitute for, the sellers’ obligations to maintain a portion of the transaction price in escrow to ensure that funds are available to indemnify the buyers in the event of a breach. Although coverage is available for both buyers and sellers, the vast majority of R&WI Policies underwritten are buyer-side policies in which the acquiring company or its affiliate is the named insured.
Please see full publication below for more information.