Representation and Warranties Insurance Fundamentals

The explosive growth of representations and warranties (R&W) insurance over the last decade is no secret.  But, for many, R&W insurance remains an enigma, particularly as respects filing a claim under such policies.  Indeed, even those involved in buying R&W insurance may not have experience on the claims end and, as a result, possess little knowledge on how to navigate the assortment of issues that may arise.  Of course, policyholders pursuing a claim under an R&W policy should be aware of the minefield of issues that await in establishing the two primary thresholds to recovery: breach and loss.  For example, insurers will scrutinize whether a breach of a representation has occurred, often requiring a hyper-technical showing of breach that may not align with the policyholders’ views.  Similarly, quantifying the loss resulting from the breach is rarely straightforward and often a source of dispute between insurer and policyholder, particularly as it concerns the use of a multiple.

Recently, Hunton Andrews Kurth LLP attorneys Syed AhmadPatrick McDermott, and Kevin Small published a Lexis Practical Guidance note covering the fundamentals of R&W insurance that may be a useful resource for those wanting to learn more about R&W insurance and, in particular, the various issues that may come up when filing a claim.  The note explains the R&W insurance product and the underwriting process.  It then provides a detailed description of the claim process and identifies common areas of dispute when establishing breach and loss.  A copy of the note may be found here.

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