Insurance
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Transactional Insurance/Representations & Warranties Insurance: Customized Solutions for M&A

In working on a merger or acquisition or financing a transaction, the parties involved require additional comfort on a number of issues. Transactional insurance products provide that comfort. Owens Group has the expertise and experience to assist our clients in structuring and implementing such coverages to achieve your unique transaction goals.

Representations and Warranties Liability

The allocation of risks and liabilities between the parties in a merger or acquisition is one of the most fundamental and difficult aspects of any transaction. Traditionally, the accuracy of a seller’s representations and warranties has been backstopped by an escrow, which is often highly inefficient and can unnecessarily tie up money and resources for years. The insurance industry has developed an alternative solution: Representations and Warranties Liability Insurance (R&W Insurance). R&W Insurance protects the insured against unintentional and unknown breaches of a seller’s representations and warranties in a purchase agreement. It can also free up cash that previously languished in escrow.

Intellectual Property

The shift from tangible to intangible assets has resulted in greater exposure to patent, trademark, and copyright infringement litigation, which can affect a deal and erode value from portfolio companies. To address this risk, Intellectual Property Liability insurance is available to protect a client’s entire intellectual property portfolio against losses resulting from intellectual property litigation, covering both defense costs and awarded damages.

Tax Insurance

Tax insurance is a powerful tool in M&A transactions in which uncertainty regarding taxes can create hurdles in the deal. It will reimburse a company for additional taxes, interest and penalties that are incurred with respect to one or more related uncertain tax positions that arise in connection with a merger or acquisition. The uncertain tax position may be a historic position taken by the company to be acquired or it may be an uncertain tax position arising out of the contemplated merger or acquisition. Defense costs and the “gross-up” costs (income tax on receipt of the insurance proceeds) may also be covered. The insurance may be purchased by the buyer/successor in an M&A transaction or by the seller/acquired company as part of its preparation for sale.

 

Specific Litigation Insurance

Insurance for a pending or threatened litigation is available when the pending litigation jeopardizes an extraordinary transaction and is neither a class action nor a “mass tort.” Depending upon the maturity of the lawsuit, the insurance can either cover the defendant or acquirer, buy out the litigation, or provide limits in excess of a retention.

Specific Contingency Insurance

Specific Contingency Insurance (SCI) is designed to provide coverage for known and specific issues that arise between the buyer and the seller in a merger or acquisition.

Litigation Buyout

Sometimes when the selling company in a transaction is involved in an ongoing litigation issue, a financial resolution of the issue between the buyer and seller is simply not enough. The buyer wants not only to be made whole in the event of an adverse ruling, but also wants a third party to take over the entire litigation process. This is where Litigation Buyout insurance can help. When an organization is covered by Litigation Buyout insurance, the insurance company steps in and takes over the defense, along with any financial impact associated with it.

Pension Liability

In any acquisition, employee benefits and obligations must be taken into account, including the provision of pension benefits to employees. Pension Liability responds in the event financial losses with pensions were not disclosed or spotted by due diligence at the time of the deal.

Successor Liability

Successor Liability insurance protects a buyer of assets from liability of the seller.

Environmental Remediation Cost Cap & Liability

Almost every Merger & Acquisition transaction will include some level of known and unknown envi­ronmental liability, threatening the feasibility of a deal, or making it less attractive to a buyer. Environmental insurance products can be extremely effective tools in addressing these risks and for closing the gap between the perceived risks of the buyer and seller or a gap in their willingness to retain or assume that risk. Additionally, those behind financing the transactions typically require additional measures to address risk, which may include the purchase of Environmental insurance to provide assurance with the nature and size of the various environmental exposures.

Among the insurance solutions to help address both known and unknown issues are:

  • Remediation Cost Cap Insurance
    These policies insure known conditions, and are designed to protect owners or remediation firms from potential cost overruns associated with the execution of a cleanup. Cost cap policies can provide assurance as to the size of a firm’s total liability for an environmental cleanup when involved in a merger or divestiture, facilitating M&A transactions that may have otherwise stalled due to a disagreement over the size and allocation of known and unknown liabilities.
  • Environmental or Pollution Liability Insurance
    These policies provide coverage for remediation costs associated with unknown pollution conditions at specific sites, along with third-party bodily injury and property damage.

Owens Group has the expertise to help you assess existing and potential environmental risks, and provide comprehensive protection for your investment.

Please contact us for a complimentary consultation and assessment.

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