Insurance is a diligence workstream in every acquisition, and errors surface after closing when a claim arrives.
Policy inventory. Every policy for the current and prior years, with limits, retentions, retroactive dates, and claims history including reserves.
Occurrence versus claims-made. Occurrence policies continue to respond to pre-closing occurrences after closing; claims-made policies do not respond to claims made after the policy ends, which is why tail coverage is required.
Tail coverage. For directors and officers, professional liability, employment practices and cyber, purchased at closing for a term of years, with the cost allocated in the agreement.
Assignment. Policies generally may not be assigned without consent, though many courts hold that the right to recover for a pre-closing occurrence may be assigned notwithstanding.
Named insured changes on closing, and the gap risk if binders are not in place at the moment of transfer.
Loss runs and the claims history, which drives the buyer’s future pricing.
Self-insured retentions and captives, and whether the seller’s captive will continue to respond.
Representations about coverage in force and about claims, and a specific indemnity where the history is significant.