Warranty and indemnity insurance have become a key feature in M&A transactions. Sellers’ warranties and representations are often intensely negotiated and may provide commercial buyers with comfort about the state of the business, but what happens when they prove to be inaccurate for the commercial buyer that has relied on them? That is where warranty and indemnity insurance can step in.
But how should insurers respond if there is a breach of an insured warranty or a shortfall in value or revenue in the months after the deal has closed and the parties have gone their separate ways? How easy will it be for buyers and insurers to recover the loss from the seller? What happens if the seller has exited the business due to financial difficulty or has already distributed the sale proceeds?
This is where it is important to work with a team of experienced insurance lawyers who have represented some of the world’s leading warranty and indemnity insurers and their insureds. Our team has experience across a range of industry sectors, advising insurers on buy and sell-side warranty and indemnity policies. We know how to navigate complex coverage disputes, defend the interests of the insured, and have acted as monitoring counsel for insurers of underlying proceedings brought against insureds.
If you’re contemplating an important trade sale or purchase and need advice on drafting or reviewing appropriate warranties and indemnities, or if you’re facing a prospective claim, Wotton + Kearney has a team of lawyers who can help you achieve realistic, commercial solutions.
Examples of our experience are below:
Arbitration Proceedings under a buy-side policy in London market
Represented excess layer insurers in arbitration proceedings on a claim made under a buy-side policy for EUR270 million – the biggest warranty and indemnity claim in the London market in recent years.
Coverage advice regarding claim for indemnity costs under a sell-side agreement for patent infringement proceedings in the US
Advised insurers on policy coverage regarding patent infringement proceedings that were issued in the US against the target company’s buyer, which sought an indemnity for its defence costs from the insured sellers under an indemnification agreement. Also acted as monitoring counsel of those proceedings, which were in the US District and Federal Courts.
Coverage advice on a sell side policy for breach of tax covenants by the target company across 6 countries
Advised insurers on policy coverage regarding notifications made under a sell-side policy relating to alleged breaches of the tax covenant in a sale and purchase agreement. The notifications related to various alleged breaches by the target company in England, Kazakhstan, Trinidad & Tobago, Italy and Azerbaijan.