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

A rare lawsuit concerning coverage under a reps & warranties policy presents two issues of interest to M&A lawyers:

  1. If the insured under a reps & warranties insurance policy fails to obtain the insurer’s consent to a settlement, coverage for that settlement is forfeited, even if the settlement was “panicked” and on a short timeframe.
  2. Sell-side policies do not cover allegations of seller fraud. This is why buy-side policies are preferred – they cover the buyer’s losses resulting from seller fraud.

Continue Reading Reps & Warranties Insurance Case Highlights the Need for New Expertise and Old-Time Common Sense

The New York Court of Appeals, the state’s highest court, recently rejected an attempt to apply the “common interest doctrine,” an exception to the general rule that communicating privileged information to a third party waives the attorney-client privilege, to situations where separately represented parties communicate attorney-client privileged information in connection with transactions or other circumstances other than in anticipation of litigation. Ambac Assur. Corp. v. Countrywide Home Loans, Inc., No. 80, 2016 WL 3188989 (N.Y. June 9, 2016). As this case shows, companies should be mindful of what information they share outside the litigation context, because the common interest doctrine may not be available to protect that information.
Continue Reading ‘Sorry, But You Have Nothing in Common’: The New York Court of Appeals’ Recent Rejection of the ‘Common Interest Doctrine’ Outside the Context of Litigation