Claims Under A W&I-Insurance

Author:Mr Rens Markus
Profession:Loyens & Loeff
 
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Merel van Asch and Rens Markus published an article (in Dutch) concerning claims under a warranty & indemnity (W&I) policy (M.M. van Asch & R.L. Markus, 'Claims onder een W&I-verzekering', TOP 2019/7). The total amount of claims under W&I-insurances keeps rising. W&I-policies often contain extensive terms and conditions, for which reason insured buyers may lose sight of the (semi-)mandatory legal provisions regarding insurances included in the Dutch Civil Code (DCC).

In the article, Merel and Rens deal in greater depth with the notice of claims, coverage and the most important rights and duties during the claims process. In this blog, we provide a high-level summary thereof.

Notice of claims

The W&I-insurance is a 'claims-made'-policy, so a claim must be made during the policy period. In case the claim notice is submitted to the insurer during the policy period, but not as soon as possible after the insured buyer gained knowledge of the (potential) claim, the insurer will be legally permitted to reduce the insurance payment with any damage suffered by the insurer due to the lateness of the submission of the claim notice. If a claim is submitted to the insurer within the policy period, but not as soon as possible, this can only lead to a full lapse of the insurance claim if (i) the policy stipulates this and (ii) the insurer was harmed in its reasonable interest.

Is the claim insured?

Some insured warranties are often qualified by, for example,the addition of a knowledge qualifier in comparison to the warranties included in the share purchase agreement (SPA). A breach of the warranties under the SPA therefore does not always lead to a breach of the corresponding insured warranty. At signing and closing, it is often required that a 'no claims declaration' is issued by the insured buyer to the insurer, in which the insured buyer declares that it is not aware of a breach of the insured warranties or the tax indemnity. This 'awareness' is mostly limited to actual knowledge of the insured buyer or his deal team. This is, in our view, a deviation from Section 7:928 DCC, which deviation should for the avoidance of doubt be mentioned in the policy.

Alleged...

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