W&I Insurance: Growing Pains Or Coming Of Age?

It has been many years since warranty & indemnity (W&I) insurance could be described as a new product. It is now used in transactions across most sectors and geographies. We set out below some key perspectives on claims and maximising cover under a buy-side policy.

Applicable law and quantum of damages

The insuring clause usually provides that the buyer can recover under the policy the damages it would have been able to recover under the SPA or management warranty deed (MWD) if the key restrictions (defined usually as "limitation provisions") had been disapplied. Therefore, how damages are usually assessed under the applicable laws of the SPA or MWD is key. 

In England, the default position will usually be a calculation comparing the warranty true/warranty false basis, assuming a hypothetical willing buyer and seller operating at arm's length (i.e. the diminution in value or DIV). This often requires expert evidence, and in undertaking the calculation, a breach can impact a number