M&A, Bankruptcy, and Insurance (Part 2)

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Risk transfer considerations Risk transfer considerations for the seller Risk transfer issues for a seller who is discontinuing operations include the following: Is the purchase agreement clear as to successor liability? Is the company held harmless and are indemnification agreements in place? Is there evidence of insurance carried by the acquiring company for a specified number of years after the sale? Does the company have notice of cancellation, non-renewal, or failure to renew? Is excess liability insurance purchased for discontinued operations? Is D&O Insurance maintained for a number of years (at least 5 years) beyond the sale? Is Fiduciary Liability the same as in the D&O Insurance? Is there Employee Dishonesty Insurance? Will Professional Liability (if previously needed) be maintained for a number of years beyond the sale? Risk transfer considerations for the buyer Risk transfer issues for the buyer include the following: Is the type of purchase clearly defined as acquisition, consolidation, or merger? This is a critical point. Is the company specifically rejecting acquisition of liabilities in the purchase agreements? Is the company held harmless and are indemnification agreements secured from the seller? Is there evidence of insurance carried by selling company for a specified number of years after the sale? Is the buying company added as an additional Insured to the seller's liability insurance? Is a notice of cancellation, non-renewal, or failure to renew specifically required? What is the status and structure of the buying company's own insurance as excess insurance? Or is there other insurance carried by the selling company? Is D&O Insurance maintained by the seller for a number of years (at least 5) beyond the sale? This insurance may be required. Sometimes this is referred to as run-off coverage. Is Fiduciary Liability for at least the same term as the D&O insurance? Is there Employee Dishonesty Insurance? Are other forms of Professional Liability (if previously needed) maintained by the seller for a number of years beyond the sale?

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Not only are policy forms, clauses, rules and court decisions constantly changing, but forms vary from company to company and state to state. This material is intended as a general guideline and might not apply to a specific situation. The authors, LunchTimeCE, Inc., CEfreedom, and Insurance Skills Center, and any organization for whom this course is administered will have neither liability nor responsibility to any person or entity with respect to any loss or damage alleged to be caused directly or indirectly as a result of information contained in this course.