Hunton Insurance Recovery Blog

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.