Warranty and indemnity (W&I) insurance is widely used across the breadth of global M&A activity to provide protection to buyers for breaches of warranty. While W&I insurance policies govern how and what claims can be made by buyers, there is considerable case law relating to the measure of damages for breach of warranty. In particular, recent case law confirms that the normal measure for damages is the difference between the value of the shares 'as warranted' and the value of the shares 'as is'.
The High Court recently awarded a non-party costs order against a law firm's professional indemnity insurer under Section 51 of the Senior Courts Act in circumstances where the insurer had effectively relinquished control of the litigation's defence. This decision clarifies that the court's discretion under Section 51 is broad and that an insurer need not exert any active control over an insured's conduct of the proceedings in order to be the subject of an adverse costs order.
The High Court recently considered a negligence claim against an insurance broker which had arisen out of a fire at a waste recycling facility. In its decision, the court provided a useful recap on brokers' duties – in particular, their duty to advise clients on their pre-inception duties of disclosure. Notably, the judge considered how causation should be analysed in brokers' negligence cases where the insured has not pursued the claim against its insurer to settlement, judgment or award.
In holding that a broker was not in breach of duty by failing to give oral advice in relation to the disclosure of criminal convictions, the High Court has provided a useful reminder of the extent of a broker's duty to advise in relation to disclosure. The court also held that a lack of expert evidence materially limited, but did not exclude, the possibility of a finding that the broker had breached its duty to act with reasonable care and skill.
Recent announcements made by the Prudential Regulation Authority and the Financial Conduct Authority have clarified their approach to Brexit following the European Council's agreement to a transition period for the United Kingdom's withdrawal from the European Union. Insurers, insurance intermediaries and other financial services firms have been encouraged to assume that they will continue to benefit from passporting rights until December 2020. While this is welcome, firms cannot be complacent.