Hunton Insurance Recovery Blog

Novolex Holdings, LLC v. Illinois Union Insurance Company is one of the few cases involving a claim under a Representation and Warranties (“R&W”) policy playing out in a public forum because most R&W cases are resolved before a formal dispute and often don’t reach litigation. In addition, most R&W policies provide the policyholder with the option to have the dispute resolved through arbitration, which many clients may prefer so as to avoid the public scrutiny of a court case. Novolex, however, is one of the few cases that has proceeded to litigation.

A software company—Zywave, Inc. (“Zywave”)—recently filed a lawsuit in California federal court that may provide rare insight into how courts will resolve representations and warranties (“R&W”) insurance coverage disputes. Zywave purchased a buyer-side R&W policy in connection with its acquisition of an insurance product-distribution software company. Zywave alleged that, post-close, it learned that the seller had knowledge of “serious material performance issues with certain customers that it failed to disclose,” amounting to breaches of various sections of the acquisition agreement. The software company further alleged that if the seller had disclosed the performance issues, the software company would have either walked away from the transaction or paid a lower purchase price.

Representations and warranties coverage disputes are far more often resolved through informal or confidential proceedings rather than litigation. Law 360 recently published an article by Hunton insurance counsel Syed Ahmad, Patrick McDermott, and Jae Lynn Huckaba analyzing a rare representations and warranties dispute in the summary judgment stage of litigation between pH Beauty Holdings III Inc. and its representation and warranties insurers. As summarized below, the authors provide an overview of the issues in dispute, which related to the RWI retention, an exclusion related to the purchase price adjustment following closing, and pH Beauty’s bad faith claim.

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 ...

Hunton Andrews Kurth LLP partner Syed Ahmad was quoted on July 20 in a Law360 article titled “R&W Insurance Claim Frequency Expected To Normalize.”  The article discussed the recent reduction in R&W claims and industry experts’ expectations that claim frequency will return to normal levels this year.  Mr. Ahmad commented on the challenges policyholders may face when disputing claims in court.  In particular, while there is plenty of case law regarding disputes between buyers and sellers over breaches of representations and warranties, there is very little precedent on how ...

After any merger or acquisition, disputes can arise regarding the accuracy of representations and warranties made by the seller to the buyer. In most transactions today, the buyer obtains representation and warranty insurance to cover the buyer for losses resulting from the seller’s breach of a representation or warranty. When an R&W policy provides coverage, a seller may attempt to offset its obligations to the buyer by amounts paid by the R&W insurer. Likewise, the R&W insurer may attempt offset against the damages paid by the seller to the buyer. But other legal and equitable ...

A rare public dispute concerning coverage under a representations and warranties insurance policy is being litigated in New York’s Commercial Division. Although the case is only at the motion to dismiss stage, there are some preliminary takeaways that may help other practitioners in the space avoid similar disputes. Hunton insurance lawyers, Syed S. Ahmad, Patrick M. McDermott, and Kevin V. Small discuss those lessons in a recent Law360 article, available here.

In an article recently featured in FC&S Legal, Hunton & Williams insurance lawyers Syed Ahmad and Patrick McDermott discuss ways to guard against waiver of the attorney-client privilege when cooperating with insurers providing Representations & Warranties insurance coverage. The full article can be found here.