Representations and Warranties Insurance Drafting and Counseling Considerations

Summary

A provision in an acquisition agreement providing for the purchase of representation and warranty insurance is typically straightforward. Most commonly, the requirement to obtain an R&W insurance policy will be built into the definitions of indemnity escrow and indemnity cap limitation clauses, or found in the list of closing conditions for the acquisition. At a minimum, the clause will state which party, buyer or seller, is responsible for purchasing the policy in connection with the closing. The clause may also include a reference to the amount of coverage provided under the policy, the name of the insurer, and the liability the policy is required to cover (i.e., indemnification obligations, breaches).