Warranty and indemnity (W&I) insurance meaning

The Court of Appeal, by a majority, agreed that Judge Mark Pelling of the Commercial Court, King's Bench Division of the High Court of Justice of England and Wales was right to conclude there was no obvious error in the drafting and wording of the relevant exclusion clause within the buyer side warranty and indemnity, or W&I, insurance policy. Consequently, cover under the policy did not extend to the alleged breaches of certain warranties given by the vendors in the share purchase agreement, or SPA. This decision is illuminating for all parties actively engaged in the W&I market and acts as a reminder that, even where a warranty is listed as 'covered' in an appendix to a W&I policy, it remains subject to the broader terms and conditions set out in the body of the policy, including exclusion clauses...

Global M&A insurance claims slumped by 21% in 2023 The insurer’s global transaction solutions arm reported it received 120 notifications for representations and warranties claims in 2023, a 21% decrease from 153 a year earlier, according to the unit. Representations and warranties—termed warranty and indemnity insurance in the UK—typically safeguard purchasers against sellers’ breaches of contractual guarantees in such deals...

This edition includes: Cases and decisions Types of insurance Regulation Solvency II New and updated content Case trackers Key dates Daily and weekly news alerts LexTalk®Insurance: a Lexis®Nexis community Cases and decisions UKSC confirms approach to damages in mixed injury cases following whiplash reforms (Hassam v Rabot) In Hassam v Rabot, the Supreme Court examined how the ‘whiplash reforms’—which set a statutory tariff for PSLA awards for whiplash—operate in ‘mixed injury’ claims where whiplash and non‑whiplash injuries arise from the same accident. The Court confirmed a broadly two‑step method for valuing PSLA. First, the judge should total the tariff figure for the whiplash element with the common law assessment for PSLA attributable to the non‑whiplash injury. Second, the court must then consider a deduction to prevent compensating twice for the same PSLA already reflected in both the tariff and the common law sum...

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z This glossary provides helpful (re)insurance and underwriting definitions. For focused guidance on reinsurance terminology, see Practice Note: Reinsurance—essentials. A Accident An unforeseen or unintended event or incident that typically results in damage or injury (physical or financial) to the insured or a third party. Accidental damage Unintended or unexpected harm or damage caused to property or a person. Accidental death benefit Some life insurance policies pay an extra amount, over and above the original sum insured, if the insured dies because of an accident. Act of God (force majeure) An occurrence beyond anyone’s control, such as a natural disaster. Active underwriter The person with primary responsibility and authority to accept insurance and reinsurance risks on behalf of the members of a syndicate in the Lloyd’s market. See also Underwriter. Actuary A qualified professional who...

Coronavirus (COVID-19)—impact on private M&A transactions [Archived] ARCHIVED: This archived Practice Note examined how the coronavirus (COVID-19) pandemic affected private M&A (share purchase or asset purchase) deals. It has not been revised since May 2022. Factors affecting deal activity For the duration of the coronavirus (COVID-19) outbreak, many strands of corporate law will be influenced, shaping the work of legal practitioners and their clients. The effects on private M&A transactions are likely to extend beyond the pandemic’s immediate timeframe, given the wider repercussions for the economy and for individual businesses. Direct consequences arising from the pandemic include: financial viability of pursuing an acquisition—amid the economic turmoil and global shock, can buyers access the requisite funds to complete a private M&A deal? A prospective purchaser may prefer to preserve or strengthen cash reserves, rather than hunt for acquisition prospects, as a prudent approach to financial management to withstand the challenges posed by the COVID-19 pandemic heightened transaction risk—concluding a deal during a period of...

In a share purchase agreement (SPA), it is standard for the seller to grant the buyer warranties and indemnities. Why warranties and indemnities are needed For any share acquisition, the buyer starts from the maxim caveat emptor (let the buyer beware). As they cannot know with certainty exactly what they are acquiring when buying a company, the purchaser seeks protection from the default common law position by building suitable contractual terms into the SPA in the shape of warranties and indemnities. Taken together, these provisions protect the purchaser against the uncertainties inherent in the target and address the caveat emptor rule. The buyer will also undertake due diligence on the target company (or target group) to learn as much as possible before proceeding. For additional detail on the diligence process, see Practice Note: Due diligence—share and asset purchases. Without warranties or indemnities, and unless the seller has made a misrepresentation during negotiations, the buyer would have no recourse against the seller if matters relating to the target...

Warranty & Indemnity insurance provisions—pro-buyer—short form—share purchase agreement Insert the following definitions as new definitions into clause 1 of the relevant Precedent—Share purchase agreement—pro-buyer—corporate seller—short form or Share purchase agreement—pro-buyer—individual sellers—short form (as applicable): 1 Definitions and interpretation W&I Policy means the warranty and indemnity insurance policy issued to the Buyer which, in accordance with its terms, covers risks arising from any actual or potential breach of the Warranties and claims made under the Tax Covenant; Insert the following as a new clause immediately following the clause 5 headed ‘Seller(s) Warranties’: 6 W&I Policy 6.1 The Buyer: 6.1.1 warrants to the Seller as at the date of this Agreement, that it has taken ...

Warranty & Indemnity insurance provisions—pro-seller—share purchase agreement Include the following terms as additional definitions in clause 1 of the relevant Precedent—namely, as applicable, Share purchase agreement—pro-seller—corporate seller—conditional—long form; Share purchase agreement—pro-seller—corporate seller—unconditional—long form; Share purchase agreement—pro-seller—individual sellers—conditional—long form; Share purchase agreement—pro-seller—individual sellers—unconditional—long form; or Share purchase agreement—pro-seller—corporate seller—short form: 1 Definitions and interpretation W&I Claim • means a claim brought by the Buyer under the W&I Policy; W&I Insurer • means the insurer or underwriter that issues and maintains the W&I Policy and is responsible for providing insurance cover for the risks set out in that policy; W&I Policy • means the warranty and indemnity insurance policy issued to the Buyer that, in accordance with its terms, provides cover for risks arising from any actual or potential breach of the Warranties and from claims under the Tax Covenant; Insert the following as a new clause immediately after the clause titled ‘Seller(s) Warranties’: 9 W&I Policy 9.1 The Parties...

Warranty & Indemnity insurance provisions—pro-buyer—long form—share purchase agreement Add to clause 1: Uninsured Event: facts or matters giving rise to a breach of Warranty not covered by the W&I Policy. W&I Policy: the warranty and indemnity insurance issued to the Buyer covering risks from Warranty breaches and Tax Covenant claims. The Buyer warrants it has placed and will maintain the W&I Policy, under which the insurer irrevocably waives subrogation, contribution or other claims against the Seller, except for loss arising from the Seller’s fraud [ or fraudulent misrepresentation ]. The Buyer shall not rescind, terminate, amend adversely, waive rights under, or act/omit so as to render the W&I Policy void or unenforceable. Replace ‘Thresholds’ with: The Seller’s maximum liability for all Warranty Claims [ and Tax Covenant Claims ] other than for an Uninsured Event is £1.00, regardless of non‑payment, vitiation, expiry, termination or underwriter insolvency. [ For an Uninsured Event, the...