The issue of mergers and acquisitions is a popular topic in the insurance news world. While there are many issues related to mergers and acquisitions to consider, there is a key – if not critical – one that doesn’t seem to get the attention it deserves: how your errors-and-omissions policy will address potential liability issues that can make a good deal a “nightmare” without the proper attention. While this is not an overly complex matter, it is also not all that simple. Bottom line, whether you are the buyer or the seller, proper planning and appropriate attention to detail are extremely important.
Consult your E&O carrier or policy
Mergers and acquisitions seems to be an area where there is a tremendous lack of consistency among all E&O carriers on the options available and the process that must be followed. While the policies typically provide the necessary coverage, the options regarding the number of years varies significantly from carrier to carrier. This definitely speaks to the need to plan ahead.
A good time to become educated on some of the significant coverage issues is as soon as you start thinking about buying or selling. Any good E&O carrier “worth its weight” can provide guidance and direction based on your specific scenario. For example, will the E&O carrier treat the transaction as an acquisition or is it actually a merger? What additional information is needed? Will the carrier agree to provide the coverage based on the details of the transaction? Contact the underwriter, broker or agents’ association that played a fundamental role in the purchase of your E&O coverage and explain the situation. Don’t hesitate to ask all of the necessary questions.
Both the buyer and the seller should allow sufficient time for the development and providing of additional paperwork, copies of the proposed transaction documents, applications, etc., the E&O carriers may require.
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