When a dispute arises after completion of an M&A transaction, buyers often find themselves facing complex challenges in recovering losses for breaches of warranty or under an indemnity clause. Warranty and indemnity (W&I) insurance, while designed to provide protection, can present its own hurdles once a claim under a share purchase agreement (SPA) is on the table.

In today’s market, the volume and value of W&I insurance claims are rising, and the process of advancing a claim against an insurer requires strategic management, robust evidence, and expert legal guidance.

About this article

• This bulletin is specifically addressed to buyers who are confronted with the practical realities of pursuing W&I insurance claims in the post-closing context—after a breach has occurred and a dispute is underway.
• Drawing on recent trends and best practices, we outline how buyers can maximize their prospects of a successful claim, from timely notification and effective communication with insurers, to overcoming evidentiary challenges and navigating complex insurance structures.
• For those currently facing a W&I insurance dispute, the right legal strategy can make the difference between a denied claim and a swift, favorable recovery.

Recent trends

Recent years have seen a marked increase in both the value and volume of W&I claims, e.g. for 2024, Howden reported pay-out by insurers of EUR190 million¹ and Euclid of around USD300 million². Over half of successful claims are settled within 12 months, demonstrating the process’s efficiency when managed well.³

^{1 Howden M&A Annual Review 2025, p. 31 (https://www.howdengroup.com/sites/huk.howdenprod.com/files/2025-03/howden-m-and-a-2025-annual-review.pdf, last accessed on September 4, 2025)}

^{2 Euclid Transactional R&W/W&I Insurance July 2025 Update (https://euclidtransactional.com/euclid-transactional-rw-wi-insurance-july-2025-update/, last accessed on September 4, 2025)}

^{3 Howden M&A Annual Review 2025, p. 33 (https://www.howdengroup.com/sites/huk.howdenprod.com/files/2025-03/howden-m-and-a-2025-annual-review.pdf, last accessed on September 4, 2025)}

Optimal strategies for managing claims under W&I insurance

Effectively managing claims under W&I insurance is crucial for ensuring successful outcomes. The following provides key strategies for advancing claims against W&I insurers.

Timely notification of claims is crucial

Strict adherence to notification deadlines in both the SPA and the W&I policy is vital to prevent claims from being precluded. The insured usually must notify the insurer(s) or the broker of the claim within the W&I policy’s specified timeframe, and likewise inform the seller of any breach under the SPA in full compliance with its notice provisions. Additionally, the claim must not be time-barred.

When notifying under the W&I policy, the insured should provide sufficient detail and supporting documentation to substantiate the claim for the insurer and its team to gain a complete understanding of the issues.

Engaging experienced disputes lawyers already at this early stage is critical – not only to ensure compliance with notification deadlines and the preparation of a robust notification, but also to optimize evidence gathering, manage communications with the insurer, and strategically steer the entire process. Where appropriate, dispute lawyers can assist in instructing experts to provide reports substantiating the breach and quantifying the loss.

Common pitfalls to avoid

• Late or insufficient notification of the W&I insurer
• Incomplete documentation of the breach and damages
• Uncoordinated or inconsistent communication with the W&I insurer and sellers
• Failure to involve legal counsel early enough

Advancing claims against the W&I insurer is often advantageous

The buyer may have the option to pursue a claim either under the SPA directly against the seller, or under the W&I policy against the insurer. However, the situation may be more complex if both the dispute resolution mechanism under the SPA and the W&I policy require the buyer to file a request for arbitration under the W&I policy and the SPA within certain time limits. Either way, bringing a claim against the W&I insurer may often be the most advantageous avenue for the following reasons:

• Streamlined and less contentious process: The W&I insurer typically manages claims in a more efficient and less adversarial manner, helping to avoid direct confrontation with the seller and preserving business relationships.
• Greater financial security: Insurers are usually well-capitalized and able to pay out claims, whereas sellers may have limited assets post-completion, making recovery from them uncertain.
• Broader protection through synthetic coverage: W&I policies can offer synthetic guarantees or enhancements, allowing buyers to recover losses that may go beyond the scope of the SPA, such as removing knowledge or materiality qualifiers or extending limitation periods.
• Limited defenses available to insurers: Insurers cannot generally rely on set-off, counterclaims, or personal defenses that would be available to the seller under the SPA, reducing the risk of disputes over liability.
• Potential for quicker resolution: Insurers are experienced in handling claims and may be incentivized to resolve matters efficiently to avoid protracted disputes and reputational damage. This can result in a quicker resolution compared to litigation or arbitration with a seller.

Ongoing cooperation and constructive communication with the insurer

Maintaining open and constructive communication with the insurer is essential. The insured should respond timely to requests, keep the insurer updated on any developments, and act prudently to minimize losses. This collaborative approach builds trust, facilitates a smoother and more efficient resolution, and helps ensure that the claim is processed without unnecessary delay.

Lawyers play a key role in managing these interactions, safeguarding the insured’s interests and ensuring all communications are consistent with policy requirements. Brokers also provide valuable support, leveraging their market knowledge and acting as intermediaries between the insured and the insurer.

Proving a W&I insurance claim differs from standard M&A disputes

In W&I insurance claims, buyers often seek compensation for breaches of various warranties, with disputes frequently centered on breaches of financial statements or tax guarantees:

Most common warranty breaches (paid claims)⁴

4. Howden M&A Annual Review 2025, p. 35 (https://www.howdengroup.com/sites/huk.howdenprod.com/files/2025-03/howden-m-and-a-2025-annual-review.pdf, last accessed on September 4, 2025).

Unlike standard post-M&A disputes against the seller, advancing a claim under W&I insurance presents distinct challenges. Proving such claims can be more difficult because the seller, not being a party to the dispute, typically holds more relevant information, while the insured must gather evidence – often with expert support. The burden of proof generally lies with the insured, although some W&I policies are more buyer-friendly in this regard.

Additional evidentiary hurdles may arise where warranties impose specific qualifications, such as knowledge qualifiers. Detailed records of the transaction and early communications are essential, and, where necessary, witness statements can help fill gaps. Insurers may also dispute the interpretation or scope of warranties. Policy exclusions – such as prior knowledge or disclosure during due diligence – can preclude claims, with the insurer usually required to prove the exclusion applies.

Managing claims in an insurance tower: additional considerations

When multiple insurers in a layered coverage structure are involved - commonly referred to as an “insurance tower” - distinct procedural and strategic considerations arise. Each insurer’s position within the tower, and their corresponding exposure, can result in diverging interests and approaches to claims, which in turn give rise to particular challenges for the insured.

A key issue is the insured’s ability to pursue claims against multiple insurers in a single arbitration. Whether this is possible depends on the specific arbitration clauses set out in each policy, as well as the rules of the chosen arbitration institutions. Where a coverholder and/or broker is involved, these provisions are typically coordinated, but variations can still occur, potentially complicating the process.

Another significant challenge is the concept of exhaustion. Excess layers of insurance are generally only triggered once the underlying (primary) layer has been fully exhausted. However, if the primary insurer declines to pay, the insured might still seek compensation from excess insurers if damages exceed the primary insurer’s limit. The insured may also seek to act against all layers simultaneously, although, with joint arbitration clauses, higher layers may argue that the insured must first obtain an award against lower layers.

Substantiating incurred damages involves experts

Finally, substantiating incurred damages is usually a significant part of W&I disputes. The quantum aspect of any W&I dispute usually involves a business valuation conducted by forensic accountants. To present a robust case, it is advisable to model various alternative scenarios, especially since hypothetical scenarios will always carry residual doubts.

Policies may also seek to exclude consequential damages, lost profits, or impose limits on liability, thus presenting further hurdles to the insured’s damage substantiation.

Payment of claims by the insurer

The likelihood of a W&I insurer paying a given claim is shaped by several factors: the clarity and scope of the policy, the nature and substantiation of the claim, and the circumstances surrounding the breach. Insurers generally aim to honor valid claims to uphold their market reputation and foster trust. However, the outcome often hinges on the quality of the insured’s due diligence process, the clarity of the policy terms, and the insured’s responsiveness in providing information and supporting documentation.

In practice, direct negotiations and in-person meetings between the insured, the insurer, and their respective legal advisors are often instrumental in persuading the W&I insurer to settle and pay the claim. Where a consensual resolution cannot be reached, a well-prepared arbitration claim may ultimately be necessary to secure payment.

Ultimately, securing payment from the insurer depends on a strategic approach, robust evidence, and proactive management throughout the claims process.

Practical action checklist: What to do when a W&I insurance claim arises

• Notify the insurer and broker timely, adhering to all deadlines
• Gather and organize all relevant documentation and evidence
• Maintain clear and coordinated communication with all parties
• Document all interactions and developments thoroughly
• Maintain a consistent factual and legal presentation under the SPA on the one hand and the W&I policy on the other.

[View source.]