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Representations & Warranties

Home Representations & Warranties

Protects Against The Adverse Financial Consequences from M&A Activity

Mergers and acquisitions play a prominent role in the healthcare industry, increasing the risk of post-acquisition litigation. Companies involved in M&A activity may face backlash if the deal goes wrong. Representations & Warranties (R&W) is an insurance policy that protects buyers and sellers against financial losses from specific breaches of representations and warranties in the transaction agreement.

Coverable representations and warranties can include tax, environmental, litigation, contractual, financial, intellectual property, and other matters where the outcome is uncertain, unknown, or unknowable.

Representations & Warranties Insurance Policy Features

  • Available to buyers and sellers in a transaction
  • Helps facilitate mergers and acquisitions by protecting participants from unknown risks
  • Extend the time frame for which specific problems are uncovered
  • The buyer can purchase insurance to cover higher amounts than the cap the seller is willing to accept
  • Can enable the seller to reduce or eliminate funds held in escrow
Who Buys Representations & Warranties Insurance?
Why is the R&W Product Purchased?
Who Buys Representations & Warranties Insurance?
The Buyer or the Seller can purchase a policy, typically before the sale of a company.

  • A Buyer purchases the coverage to replace its’ recourse under the contract against a seller for breach of a warranty or an indemnity.
  • A Seller purchases the cover to protect their financial liability (including defense costs) where the buyer claims for breach of a warranty or under an indemnity.
Why is the R&W Product Purchased?
  • A seller may not be willing to give a financial guarantee (or one the buyer considers adequate) e.g., in a retirement sale.
  • A seller may not have the financial ability to give a sufficient financial guarantee – e.g., in a bankruptcy sale.
  • It may enable a transaction that would otherwise fail because the potential risks to the parties are too significant to be addressed in the sale price.
  • A buyer may prefer to deal with the insurer, where a claim against the indemnity is necessary than a seller who has moved on. This is particularly true if a considerable time has elapsed or legal action could strain continuing commercial relationships.
  • Having an insurer assume complex risks may shorten the negotiation process.

Call us today at  800.240.2448  or Email us at mail@chivaroli.com

Contact Us

Chivaroli and Associates Insurance Services is a full-service brokerage firm specializing in the custom-design and placement of insurance and alternative risk funding solutions for your healthcare organization.

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Address:
200 North Westlake Blvd., Suite 101
Westlake Village, CA 91362
Phone:
805-371-3680
E-mail:
mail@chivarolitr.wpengine.com

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