Transactional liability

Demand for transactional liability insurance (Representation & Warranty (R&W)/ Warranty & Indemnity (W&I))  has grown rapidly to facilitate deals by addressing risks, including breach of warranties and indemnities and tax liabilities. Every jurisdiction presents unique challenges and specific risks to both buyers and sellers.

With leading insurance and corporate lawyers in key financial markets around the world, including New York, London, Hong Kong and Singapore, plus a wider network of international insurance lawyers across Asia Pacific, Europe and the Middle East, we are well placed to advise on transactional insurance issues affecting the due diligence and underwriting process, and post-closing disputes. The depth of experience within our firm enables us to advise across a wide range of industries and sectors.

Our team’s experience includes:

• Representing and providing advice to buyer-side and seller-side R&W/W&I insurers in numerous claims arising out of acquisitions in a variety of industries including “Software as a Service,” insurance, health care, transportation, and other technology and consumer service companies.
  
  
• Providing advice to insurers on claims involve alleged breach(es) relating to Financial Statement misrepresentations, alleged loss of material customers/contracts, third party liabilities, condition of assets, key employee/asset retention and additional working capital and tax liabilities.
  
  
• Due diligence reviews for insurer clients who are acquiring other businesses.
  
  
• Developing new transactional liability insurance products for London Market insurers, including capital relief products.

Examples of our firm’s global experience include:

• UK - Advising insurers on a number of breach claims arising out of the sale of a large telecommunications company alleging losses in excess of GBP 50 million resulting from complex claims of breach. This claim involved detailed IT and forensic accounting analyses, and also included other significant matters relating to the alleged breach of warranty with regard to a central European conglomerate.
  
  
• UK/Spain – Advising on claim by a buying entity (a global gambling and on-line gaming company) against a tax covenant included in transaction documents, following a decision of the Spanish Tax Authority regarding the interpretation of how Spanish gambling tax is to be calculated. Potential re-assessment of historic tax returns, leading to increased tax liability. Our Madrid office assisted on the interpretation of Spanish Tax law and whether the authority’s decision had binding effect on buying entity. Claim valued at between EUR 9 million – EUR 26 million (inclusive of penalties).
  
  
• Hong Kong - Advising insurers of a seller side policy regarding a claim by a Korean of the seller’s shares in a Korean company alleging breach of warranty in relation to management accounts.
  
  
• Spain - Advising W&I insurers on coverage for tax issues claimed by Spanish tax authorities after the acquisition of the shares by another company.
  
  
• USA - Representing insurers in dispute involving acquisition of an aviation parts manufacturer. The Insured alleges covered loss resulting from working capital adjustments related to alleged inventory, accounting, and financial statement misrepresentations by seller causing an impact on sale price paid for the company in excess of USD 60 million (based on Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) multiplier).
  
  
• USA - Advising insurers on numerous complex buyer-side claims in the US and Canada involving “condition of assets” losses in claims involving solar-generated power fields, warehouse and storage facilities, property boundary disputes, and condition of inventory disputes.
  
  
• USA – Represented insurers in an AAA arbitration and successfully resolved claim involving a USD 12 million coverage dispute under a buyer-side R&W Policy covering the acquisition of major rail transportation company involving alleged breaches of transaction agreement, including condition claims based on the acquired assets, undisclosed regulatory compliance issues, and related insurance disclosure issues.
  
  
• USA - Advising insurers of buyer-side policy regarding claims arising out of the purchase of numerous health care and radiology service facilities throughout the Southwestern US. The alleged breach and losses (based on EBITDA multiplier) in excess of USD 15 million dollar policy limit arose out of allegations seller had pre-closing knowledge that certain employees had intended to tender resignations.
  
  
• USA - Representing insurers in ongoing coverage dispute with insured involving potential third party liabilities and claims against the buyer arising out of the USD 105 million acquisition of food processing company.
  
  
• USA - Advising insurers in a large, complex matter involving a financial statement claim arising out of sellers’ alleged failure to disclose refinancing of accounts receivable and underlying delinquencies in connection with operation of hundreds of related franchises across the US.
  
  
• USA - Representing insurers in connection with a claim asserting alleged R&W/W&I breaches of a transaction agreement related to the acquisition of a large multinational beverage distributor. The Insured seeks coverage for losses arising out of potential liabilities related to nationwide class action asserting various claim against the Insured stemming from alleged misrepresentations regarding the marketing and sale of certain products.

• Australia - Acting for excess insurers in relation to protective proceedings issued by an insured for indemnity under a buyer side W&I policy. Claim relates to alleged breaches of accounting and material contract warranties and valued over AU$200m.
  
  
• New Zealand - Advising insurers on a claim relating to a buy-side W&I policy following the acquisition by an international company of shares in an underperforming arm of a large national company, including negotiations regarding disputed valuations and calculation of damages.
  
  
• New Zealand - Providing coverage advice to insurers and assessing a W&I claim arising from warranty breaches in respect of complex licensing arrangements in the target company.