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Parties to business transactions frequently seek to protect themselves against specific financing, litigation and transactional risks through insurance.  The types of insurance to protect business’s interests and risks in M&A is growing: 

  • Insurance for breaches of contractual representations and warranties have become increasingly common, both for buyers and sellers.
  • Standard-form policies may provide coverage for physical property being conveyed.
  • Bespoke policies protect significant deal assets with contingent value, such as litigation judgments or tax claims. 
  • Other policies protect against known contingent risks of a deal, such as pending litigation risk, fraudulent conveyance risk, tax risk, or successor liability risk.

These and other risk management techniques are tools to help sophisticated businesses reach agreement in valuing and exchanging assets.  Where insurance coverage is available, parties have greater flexibility to allowing modification of  key deal terms, including in valuing assets with uncertain future value, or in modifying or eliminating indemnification provisions, escrow requirements, and materiality caveats. Continue Reading Tailoring insurance to protect transactions and contingent risks

Texas lawmakers are now on the fast track to restrict policyholders’ rights when their insurance companies fail to pay property insurance claims arising out of weather events, such as storms involving heavy winds and hail. Now that the Texas Senate has approved House Bill 1774, Governor Abbott is almost sure to sign it.  Unfortunately, this will unleash unexpected and unpleasant surprises for Texas businesses and other insurance policyholders.

Most significantly, this harmful piece of legislation is designed to cut back on penalties that are intended to deter bad faith conduct by insurance companies, as well as to empower policyholders to fight back when their claims are denied, delayed or handled in inappropriate ways. The new legislation seeks to diminish these substantial penalties that previous Texas legislatures created for the purpose of deterring such bad faith conduct by insurance companies.  Interest that can be awarded by Texas courts for certain property insurance claims would drop from 18 percent to 10 percent.  This is a dramatic reduction in the damages that can be awarded against insurers, and the impact must be understood as encouraging abuse and delay by insurers.Continue Reading Texas Legislature Votes to Restrict Policyholders’ Rights

What does it mean to call a fire “hostile”? This question has become increasingly important for insurance policyholders, such as those seeking coverage for fires and explosions following crude-by-rail or chemical-by-rail accidents.

When an explosion or fire event results in death, personal injuries or property damage, insurance companies may rely on a pollution exclusion. These …

Whistleblower lawsuits under the False Claims Act, also known as qui tam actions, have become more common in recent years. This is particularly so in heavily regulated industries and those in which the government routinely pays or reimburses costs, such as health care, pharmaceuticals, finance, construction and defense. Companies defending themselves against government investigations and FCA actions often have the insurance coverage they need — but frequently overlook it.

Our group recently authored an article in Business Insurance discussing insurance coverage for FCA investigations and actions. As discussed at greater length in the article, businesses facing whistleblower suits and government investigations often have coverage in standard policy types, including employment practices liability (EPL), errors and omissions (E&O), directors and officers (D&O), and commercial general liability (CGL) policies. For instance, EPL policies, which cover losses from claims stemming from wrongful employment practices, may respond to FCA claims because FCA suits frequently include a claim of retaliation by the whistleblowing employee. Where employment-related claims are also at issue and intertwined or interrelated with the FCA claims, courts have ruled that EPL insurers have a duty to defend the entire action.
Continue Reading Double-check existing policies for whistleblower coverage

This week, in a 5-1 decision resolving a certified question from the U.S. Court of Appeals for the Third Circuit, the Pennsylvania Supreme Court adopted the positions advanced by Reed Smith LLP on behalf of United Policyholders, concluding that policyholders are permitted to settle claims against them by assigning to plaintiffs and other claimants their rights to both statutory and common law-based bad faith claims against their insurance companies.
Continue Reading You Can Assign Your Bad Faith Claims in Pennsylvania

On August 13, 2009, the City of Sterling Heights, Michigan received a check from United National Insurance Company for over $15.4 million, satisfying a judgment awarded by the federal district court for the Eastern District of Michigan and upheld on appeal by the Court of Appeals for the Sixth Circuit.  Apart from this payment, United National and Sterling Heights will continue to litigate the amount of additional damages that the Sixth Circuit determined to be due to the City.
Continue Reading Insurance Company Pays Up, Resolving Unallocated Settlement and Defense Costs