Page 11 - Representation & Warranties Insurance

Types of Specific Representations

and Warranties Insured

An RWI policy generally covers the representations and Other representations and warranties may not be
warranties made by the seller in the operative transaction covered by an RWI policy. Policies may, for example,
document. As the demand for RWI policies changes exclude coverage of the following:
and as claims are noticed and paid, an insurer’s appetite • Representations and warranties that are subject to
to accept the risk of breach for certain representations great uncertainty or difficulty in estimation, such as
and warranties similarly changes. Further, the types of certain environmental hazards and underfunded
representations and warranties that are covered by an benefit plans
RWI policy may vary by industry, the size of the deal,
whether the transaction is public or private, and deal- • Actual knowledge by one of the deal team members of
specific circumstances. Seller representations and a breach prior to closing
warranties that may be covered by an RWI policy include • Covenants, forecasts, and forward-looking statements
the following: • Interim breaches of which knowledge is obtained

• Capitalization during; the date the operative transaction agreement is
executed; and the date the deal closes
• Tax matters
• Net operating losses and other tax matters
• Compliance with laws
• Purchase price and working capital adjustments that
• Employee disputes are settled by the buyer and seller as part of calculating
• Financial statements the closing balance sheet

• Intellectual property
• Legal proceedings
• Material contracts

• Undisclosed liabilities
• Organization and standing
• Permits

• Real property
• Title to personal property
• Valuation of assets

• Vendors and customers
• Business practice or ordinary course

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