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Where Did My Coverage Go?

By Grassia, Stephanie
Publication: Risk Management
Date: Wednesday, February 1 2006

Your company is about to close on an acquisition that will cement its position in the marketplace. You have done your due diligence and believe you are aware of all of the other company's potential liabilities that are included in the deal. The figurative champagne

bottle is about to be uncorked...and then your insurance broker calls with a problem. There is a clause in the other company's insurance policy that prevents assignment of the policy to your company without the insurer's express consent.

It is a scenario that plays out on a regular basis across the country, where all too often, no one in an acquiring company even thinks about the insurance policy until the deal is nearly closed. If the deal is structured as an asset acquisition, the acquiring company does not expect to take on any of the liabilities. Or, it is just assumed that if the liabilities are part of the deal, the insurance coverage will follow. While these are perfectly reasonable assumptions, it is important to know when they do not apply-or at least when to inquire whether they do or not.

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