Transactional Liability

Transactional Liability is a term which covers a broad spectrum of insurable risks. 

Most notable in the current market is Warranty & Indemnity insurance (also known as Representations and Warranties insurance). Increasingly recognised as a cost-effective facilitation vehicle for M&A deals, this insurance provides a mechanism through which risk is transferred from the transacting parties to an insurer. 

The spectrum of insurable risks extends far beyond Warranty & Indemnity insurance, including litigation risk cover, pension and tax uncertainties, and bespoke innovative products responding to specific transaction risks such as orphan funds or employment-related factors in M&A deals.

What we do

Working together, our specialist Transactional Liability team advises insurers on underwriting, due diligence, coverage and claims issues in the M&A context. 

Our Insurance team has extensive experience having been involved in the early development of the transactional liability market, advising upon numerous bespoke transaction-specific wordings and drafting standard form policies for leading carriers and MGAs. 

For M&A transactions we have a team of over 40 lawyers, spread across four UK offices, which acted on more than 90 completed transactions in 2017 with an aggregate value in excess of £1 billion. The team acts for vendors, purchasers, investors, and investee entities across a wide range of business sectors together with banks and other funders  and works alongside specialist lawyers who advise in the fields of taxation, finance, compliance and regulatory, employment, pensions, real estate, competition, procurement and IT and intellectual property aspects. For more information on our transactional expertise in M&A, click here.

Our Commercial Litigation team has a wealth of experience in dealing with SPA disputes, acting for both buyers and sellers across a range of sectors and in multiple jurisdictions. It acts for insurers and insured where litigation against third parties is required and/or subrogated recovery action needs to be brought. For more information on our dispute resolution experience click here.

What we are known for

• We act for leading UK and global insurers and reinsurers;
• Our Corporate team provides the full range of M&A services in a variety of sectors and advises insurers in relation to transaction risk profiling;
• Our Commercial Litigation team have a wealth of experience in dealing with commercial SPA disputes across a range of sectors and in a number of jurisdictions;
• Our specialist policy wording teams advises on bespoke transaction-specific wordings and drafting standard form policies for leading carriers;
• Working with specialist colleagues, our Insurance team and Commercial Litigators advise insurers and MGAs on policy coverage issues under buyer and seller side warranty and indemnity insurance policies; and
• We pursue litigation on behalf of insurer and insured clients, seeing successful reimbursement of indemnity outlay.

Experience

Corporate Due Diligence

• Undertaking due diligence in respect of the acquisition of financial services businesses and reviewing the scope of warranty and indemnity coverage for those transactions.
• Advising insurers in connection with the acquisition of a book of UK credit insurance business and reviewing underlying documentation.

Transactional Liability Policy Wordings

• Advising a healthcare provider in negotiating buyer side warranty and indemnity policies for substantial acquisitions.
• Advising on the provision of warranty and indemnity cover on numerous VC exits.
• Negotiating and drafting buyer and seller side warranty and indemnity policies in a number of sectors for insureds and insurers.
• Advising insurers on transactional liability policy wording issues in complex property related.
• Drafting a bespoke policy wording relating to tax exposures and contingent tax liability insurance cover.

Claims Expertise

• Currently bringing a c. £20+m claim under an SPA alleging fraud against the Sellers of a UK manufacturing company.  
• Instructed by a 'big 4' accountancy firm in relation to expert valuation advice given in court proceedings involving a c.£20m breach of warranty claim.
• Advising on a c.USD50m SPA dispute arising from the sale of a group of companies in the Far East.
• Acting for the seller in an SPA dispute defending numerous breach of warranty claims based around differences between the accounting policies applied to the numbers in the completion statement and GAAP – claims successfully rebutted.
• Advising on policy coverage issues arising in relation to claims made to a seller side warranty and indemnity policy, working alongside defence counsel to secure a complete repudiation of the buyer’s claim and ensuring full recovery of defence costs expended.
• Advising on policy coverage issues arising in relation to claims made under a buyer side warranty and indemnity policy relating to the purchase of a Nordic manufacturing company, with a particular focus upon establishing the presence of a breach of any warranty with reference to a detailed review of disclosures made within the underlying due diligence process.
• Working with specialist advisors, advising upon underlying claim liability and providing realistic quantum assessment where breaches of warranty have been established due to serious accounting irregularities.