PRACTICE NOTES
Warranty and indemnity insurance in private M&A as ADR: comparing insured v uninsured warranty claims on timing, costs, settlement prospects and relationship preservation
Warranty and indemnity (W&I) insurance—insured v uninsured claims
Warranty and indemnity (W&I) insurance is a well-established mechanism for shifting risk in private M&A deals. For more detail on what W&I insurance is and how it is deployed, see Practice Note: Warranty and indemnity (W&I) insurance in M&A transactions. The route for advancing a claim under a W&I policy differs in several respects from pursuing an equivalent uninsured claim directly against a seller. Over the past ten years, W&I cover has evolved alongside the broad promotion and uptake of alternative dispute resolution, aimed at steering parties away from court proceedings. In England and Wales, both the Ministry of Justice and the judiciary have made concerted efforts to encourage resolution by means other than the courts, as litigation is frequently lengthy, costly and procedurally intricate. Yet, within the M&A sphere, there has been limited discussion of warranty and indemnity insurance as a variety of alternative dispute resolution. For a buyer, by substituting the counterparty to the deal with an insurer, it becomes possible to sidestep many of the disadvantages typically encountered in such disputes in practice today by many parties of bringing a breach of contract claim against the seller and achieve...
Insurance & Reinsurance