Interpreting What An Insurance Policy Covers: The English Courts' Approach

A recent decision examining a W&I policy's scope highlights how judges go about determining what is and isn't covered

Purchasers invariably seek to include warranties and indemnities (W&I) insurance policy in their share or asset purchase agreements. These are intended to give purchasers enhanced protection should statements made about the target business by the sellers turn out to be incorrect or the business faces liability to third parties after the purchase and that accrued before that date.

W&I insurance policies can be bought by the sellers but are more commonly brought by purchasers. Traditional W&I cover typically follows the terms of the purchase agreement, though additional "synthetic" W&I cover can go further and fill the gap between the warranties and indemnities which a purchaser would like to see included and those which could be negotiated. They allow purchasers to bring claims against insurers in respect of insured warranties, rather than try to