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representations and warranties insurance

Representations and warranties insurance refers to a form of coverage designed to guarantee the contractual representations made by sellers associated with corporate mergers and acquisitions.

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For example, the seller of a company may represent that the company's underground storage tanks are in good repair. If a serious leak is discovered following the purchase, the buyer can seek recovery for repair and cleanup costs from the seller's representations and warranties insurance policy. The key benefit of the policies is that they provide a viable alternative to escrow funds, which have traditionally been used to satisfy claims associated with representations and warranties contained in merger and acquisition documents.

Related Terms

Misrepresentation is a false or misleading statement that, if intentional and material, can allow...

Representation is a statement made in an application for insurance that the prospective insured...

A warranty is a guarantee of the performance of a product or work.