It may be used in private M&A transactions in order to manage the risks inherent in the transaction (and is increasingly common in the UK). W&I insurance may be taken out by either the buyer or the seller so as to cover losses arising from breaches of the seller's warranties and indemnities and structured as either a buyer-side or seller-side policy.

Warranty and indemnity (W&I) insurance may be used in private company sale and purchase transactions (whether structured as a share purchase or asset purchase) and occasionally on public market M&A transactions, subject to the rules of the relevant regime. W&I insurance is usually taken by the buyer but may be taken out by the seller, in each case, to cover losses arising from breaches of the warranties and tax indemnities set out in the share purchase agreement or asset purchase agreement, as appropriate (acquisition agreement) or occasionally, the warranties and tax indemnities in the tax covenant, where entered into the W&I insurance policy itself (synthetic policies – see below for more information). It is common in the UK and other jurisdictions for transactional lawyers and clients to use W&I insurance to manage the risk in a sale or acquisition. Lawyers advising clients who are considering using W&I insurance on a transaction will need to be aware of the benefits and pitfalls of the coverage, with the

Warranty and Indemnity (W&I) insurance is an established risk transfer tool in private M&A transactions. For further information on the nature and use of W&I insurance, see Practice Note: Warranty and indemnity (W&I) insurance in M&A transactions. Parties are often focused on the execution of the transactions and the related W&I insurance policy without giving due consideration to what is arguably the most important aspect of any insurance product: the claims process. This Practice Note provides information on all important aspects of the W&I claims process, from understanding the relevant contractual language in the policy itself through to settlement. W&I insurance policy wording claims clauses Claims clauses in W&I insurance policies are broadly split into two categories: • notification • conduct W&I insurance—claims notification If in doubt as to the timing or substance of a claim notification, the beneficiaries of a W&I insurance policy (insureds) and their lawyers should always contact the broker who facilitated the placement, as they will be able to give guidance on these

Warranty and Indemnity (W&I) insurance is an established risk transfer tool in private M&A transactions. For further information on the nature and use of W&I insurance, see Practice Note: Warranty and indemnity (W&I) insurance in M&A transactions. There are a number of differences to a claims process under a warranty and indemnity insurance policy in contrast to an equivalent uninsured claim against a seller. W&I insurance has developed alongside the widespread encouragement and adoption of alternative dispute resolution methods to try and avoid parties needing to litigate in the courts. In England and Wales, the Ministry of Justice and judiciary have gone to great lengths to incentivise parties to try and resolve disputes by avenues other than the courts as litigation is often time consuming, expensive and procedurally complex. However, in the context of M&A, there has been very little commentary on warranty and indemnity insurance as a form of alternative dispute resolution. For a buyer, by replacing the counterparty to the transaction with an insurer, it is possible to

HWF conducted a detailed exercise interviewing 17 insurers in the market in order to produce a paper that provides insight, and clear and extensive guidance on how warranty and indemnity (W&I) insurance and contingent risk insurance policies will be used in distressed transactions, outlining the available solutions as well as necessary requirements to get strategic insurance cover. What types of insurance cover are available for distressed transactions? For distressed transactions, three insurance options can be offered: Traditional W&I cover Traditional W&I cover can be used when: • seller and/or management give warranties under the sale and purchase agreement (SPA) or warranty deed (WD) • adequate disclosure is provided by the sellers on the contents of the warranty suite in the SPA or WD • a virtual data room or equivalent data filing system is available for review • buyer due diligence (external or internal) has been carried out covering the scope of the warranties in the SPA Observations Traditional

[ On letterhead of the company ] To: [insert name and address of the Nomad/Placing Agent] [insert date] Placing of [insert number] Placing Shares of [insert amount] pence each in the capital of the Company (the Placing) We refer to the Placing and to the placing agreement between the Company, the Nomad/Placing Agent and the Directors dated [insert date] (the Placing Agreement). Words and expressions defined in the

[ON LETTERHEAD OF THE COMPANY] To: [insert name of the Sponsor/Placing Agent] [insert date] Dear [insert text] Placing of [insert number] Placing Shares of [insert amount] pence each in the capital of the Company (the Placing) and admission of the Placing Shares and Existing Ordinary Shares to listing on the Official List and trading on the Main Market We refer to the Placing and to the agreement between the Company,

[On letterhead of the company] [insert name of the Placing Agent] [insert date] Dear [insert text] Placing of up to [insert number] Placing Shares of [insert amount] pence each in the capital of the Company (the Placing) We refer to the Placing and to the placing agreement between the Company, the Placing Agent and the Directors dated [insert date] (the Placing Agreement). Words and expressions defined in the Placing Agreement will have the

Limitations of liability provisions limiting the seller's liability for breach of the warranties will typically be included in the SPA/APA.

Insert the following as new definitions (if not already included) in the definitions and interpretation clause of the share purchase agreement: 1 Definitions and interpretation Fairly Disclosed • means[ fully, fairly and accurately] disclosed[ (relating specifically to the subject matter of the Warranty and without omitting any fact which may render the Warranty and the matter disclosed untrue, inaccurate and misleading)] in such manner and in such detail as to enable a buyer to make a clear, informed and accurate assessment of the facts, matters or circumstances concerned; Losses • means all liabilities, costs, expenses (including legal expenses), claims, actions, proceedings, damages, fines, penalties, loss of profit[ and Consequential Loss]; Tax Warranties • means the warranties[ and representations] set out in paragraph [insert number] of Schedule [insert number] and Tax Warranty means any one of them; Warranties • means the warranties[ and representations] set out in Schedule [insert number] and Warranty means any one of them; Warranty Claim • means a claim (for damages, compensation or any other relief) by the Buyer under any Warranty in respect of any event, matter or circumstance which is inconsistent

Insert the following definitions as new definitions into clause 1 of Precedent: Share purchase agreement—pro-buyer—corporate seller—conditional—long form: 1 Definitions and interpretation Claim means a claim by the Buyer for any breach of the provisions of this Agreement (including a claim for breach of the Warranties); Data Room means the data room relating to the [Company OR Group] comprising all contracts, agreements, licences, documents and other information made available to the Buyer and its advisers, as listed in the Data Room index attached to the Disclosure Letter; Replace Schedule 5 of Precedent: Share purchase agreement—pro-buyer—corporate seller—conditional—long form with the following schedule: 1 General 1.1 The following provisions of this Schedule [5 OR [insert schedule number for limitations on the warranties schedule]] shall, subject to their terms, limit the liability of the Seller in relation to a Claim[ and, where specifically provided, a Tax Covenant Claim] except where such Claim[ or Tax Covenant Claim] arises as a result of fraud on the part of the Seller. 1.2 The Seller shall not be liable for any Claim unless written particulars of it (giving full

Warranty of fitness describes a promise that goods (and, in some contracts, designs or works) will be reasonably fit for a particular purpose identified by the buyer or employer. In UK commercial practice this most often refers to the implied term as to fitness for purpose that arises where the buyer makes the purpose known and reasonably relies on the seller’s skill or judgment. It is set out in the Sale of Goods Act 1979, s14(3), mirrored for non‑sale supplies of goods in the Supply of Goods and Services Act 1982, and in consumer contracts by the Consumer Rights Act 2015, s10; broadly equivalent provisions apply in Northern Ireland. In Ireland, the Sale of Goods Act 1893 as amended by the Sale of Goods and Supply of Services Act 1980, and the Consumer Rights Act 2022, impose like obligations.Despite the label, breach is generally a breach of condition (permitting rejection and damages, subject to acceptance). In construction and professional appointments, an express fitness for purpose warranty imposes a strict outcome obligation, often higher than reasonable skill and care (see MT Højgaard v E.ON). Exclusion is prohibited in consumer contracts and subject to reasonableness in business‑to‑business agreements (UCTA 1977; Irish 1980/2022 Acts). Usage is broadly consistent across the UK and Ireland.