George Wang in Law360: 5 Tips To Get The Most Out Of Rep & Warranty Insurance

10/22/2015

As middle-market mergers surge, deal makers are increasingly turning to insurance policies for protection from risks including a seller's misrepresentation of its financial status or a failure to disclose pending litigation. Here, attorneys discuss what buyers and sellers should look for when purchasing representation and warranty insurance...

Buy-side policies typically include a so-called knowledge qualifier saying that, to the extent the buyer is aware of a claim, the policy won't cover that potential liability, said George Wang, counsel in Haynes and Boone LLP's M&A and private equity practice groups.

Buyers should try to negotiate for a narrow definition of knowledge or even to have the knowledge qualifier removed entirely, attorneys say.

"In M&A deals, there is the idea of implied knowledge: knowledge you have or should have had if you had done due diligence," Wang said. "In the insurance context, insurers will generally accept limited knowledge — that is, knowledge on the part of the senior executives and deal team negotiating the actual deal."

Excerpted from Law360. To read the full article, click here (subscription required).

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