Insurance Coverage for Pre-Closing Liabilities: Enforcing the Successor's Rights to Predecessor's Coverage

This CLE webinar will discuss how a successor company acquires and enforces insurance coverage obtained by its predecessor for claims materializing after--perhaps years after--the transfer. The panel will begin by reviewing whether insurance claims or policies can be assigned to another party as part of a business deal (or in litigation) and the impact of no-assignment or change of control clauses. Then, the program will discuss when the rights to coverage are freely transferable or transferred automatically. Finally, the presenters will explore whether an insurance company's contention that coverage for a pre-transaction occurrence cannot be assigned might support a claim of bad faith.

Buying and selling companies, corporate assets, or subsidiaries often involves transferring liabilities. When an insurance claim arises after the sale, litigation often ensues over whether the general liability or D&O insurance coverage obtained by the seller follows the liability and allows the buyer to recover. These issues are particularly crucial in the context of SPAC and de-SPAC transactions.

Insurers may invoke no-assignment or change of control clauses to resist having to provide a defense, but they are subject to several exceptions. Insurers may also assert that the transfer increased their original risk and therefore releases their obligations. When both seller and buyer are sued, insurers may contend they are only obligated to defend one, not both. The form of the transaction--asset sale, stock purchase, merger, Bankruptcy Code Section 363 sale--can have a significant impact on these issues.

Policyholders often contend that they are being required to litigate settled coverage issues unfairly and have begun to question whether an insurance company's contention that coverage for a pre-transaction occurrence cannot be assigned might support a claim of bad faith.

Listen as this experienced panel guides counsel through how a successor company can preserve and enforce occurrence-based liability insurance coverage procured by its predecessor for claims materializing after--perhaps years after--the closing