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Warranty and indemnity insurance (W&I Insurance) has been used for many years to provide cover for unknown and unforeseen losses suffered by buyers in connection with warranty or indemnity claims arising from merger and acquisition deals. With the surge of interest and investment in the Irish nursing home sector and the resulting consolidation of the market and increased deal values, this insurance product is being considered more frequently to facilitate a smooth, timely and efficient completion.

All acquisition agreements will include warranties whereby the seller warrants or confirms the condition and affairs of the target company or the nursing home business at the time the acquisition agreement is signed. If any of the warranties given by the seller turn out to be untrue, and provided the matter was not previously disclosed to the buyer or its advisers during the due diligence process, the seller has to make good to the buyer the difference between what it paid for the nursing home and what it is actually worth in light of the breach.

A seller may also be required to indemnify the buyer against fundamental risks or liabilities identified by the buyer or its advisers during the due diligence process. In this case the seller is required to make good, on a euro for euro basis, the liability or cost to the buyer or the target company arising from such matters.

Also, in some situations a buyer may insist on holding back a proportion of the purchase price or putting a certain amount into an escrow account for a period of time until it is comfortable that enough time has passed to allow it to uncover a warranty claim or its right to take a claim under the warranties or indemnities expires.

W&I Insurance can provide a real solution where the above issues are being considered and negotiated. The policy can be structured to indemnify either the seller or the buyer. In nursing home transactions, the current trend is for a buyer to obtain the W&I Insurance.


The main advantages of W&I Insurance in the context of nursing home transactions are that:

  • With increased competition to acquire Irish nursing home assets, a buyer can enhance its offer and move to the next stage of an auction process quickly by introducing W&I Insurance,

  • As the insurer takes on the risk which would otherwise sit with the seller, this enables a seller to make a “clean-break” and to receive the full amount of the purchase price without additional costs or delay, which may arise where there is a guarantee or an escrow,

  • The buyer has the additional comfort that it can claim directly against the insurer, without having to be concerned about the seller's solvency after completion of the transaction. This can be particularly relevant where there is a non-corporate seller or a non-Irish corporate seller with no further business activities in Ireland after completion of the transaction, and

  • Where a seller stays on in a consultancy role after completion or the management team in the nursing home does not change after completion of the transaction. W&I Insurance eliminates claims for breach of warranties as between the seller and the buyer, thereby maintaining the relationship between the parties who are continuing to work together to run the nursing home.


The main disadvantages of W&I Insurance are that:

  • The insurer is required to be involved in the transaction which results in another set of costs being incurred, potential delays, and additional deal obstacles to overcome as the relevant documents have be agreed, and

  • The coverage offered may not be sufficient to completely eliminate the seller’s risk. This will depend on the circumstances of the particular transaction. Insurers tend to be unwilling to cover certain areas of risk, particularly where a known likely liability has been identified.


A number of trends have emerged in the W&I Insurance landscape. These include:

  • Both sellers and buyers are strategically using W&I Insurance in nursing home auction processes. Some sellers are requiring the buyer to include W&I Insurance as part of their bid. Other buyers are introducing the concept themselves to enhance their bid. Also, from time to time, a seller will approach a W&I Insurance broker in advance of commencement of the auction process to obtain indicative terms, on price and cover, from a number of willing insurers with the intention that the W&I Insurance policy will be taken over by the preferred bidder /buyer,

  • Traditionally W&I Policies would include an “excess” or “deductible”, being the certain minimum value of insured losses before a claim can be made. However, W&I Insurance providers are now willing to offer “nil excess” which entitle the insured to claim on and from the first euro of any loss suffered,

  • Many W&I Insurance providers are also now offering, in appropriate situations, “synthetic” tax deeds which can prove very useful where a seller is unwilling or unable to accept tax liabilities on an indemnity basis. In such circumstances, the tax deed is agreed as between the insurer and the buyer, rather than the seller and the buyer,

  • “Knowledge scrapes” and “materiality scrapes” are also becoming more common in W&I Insurance policies. These have the effect of removing certain knowledge/awareness and materiality qualifiers from the warranties included in the acquisition agreements. This results in the warranty being unqualified for the purpose of a claim under the W&I Insurance policy, and

  • W&I Insurance policies can include extended warranty survival periods i.e. longer than those agreed as between the seller and the buyer in the acquisition agreement.


Despite the impact of the COVID-19 pandemic on nursing homes in Ireland, the deal market in the sector continues to be buoyant as international investors continue to drive the consolidation of the industry. Where a W&I Insurance provider is comfortable that the parties have undertaken a robust and proper due diligence and disclosure exercise, a W&I Insurance policy can be a cost effective and straightforward solution to situations which, in the past, may have taken a lot of time to negotiate or even threatened the transaction. The increased popularity of W&I Insurance has resulted in lower premium rates and broader cover. While W&I Insurance may not be appropriate in all cases, it certainly deserves due consideration when contemplating a nursing home transaction, particularly in an auction scenario.

If you have any questions or would like to discuss further, please contact Robert Dickson or Eimear Lyons.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

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