Insurance professionals spend time looking for ways to avoid errors and omissions exposures. They are careful to hire the right people, provide training and put management systems in place to ensure quality work. But a few overlook what is perhaps the most obvious avoidance mechanism: not taking on someone else's liabilities.

When an insurance agency or brokerage firm buys another firm or some of its business, the acquiring firm may become heir to the purchased company's liabilities, along with its customer lists.

Even if the transaction is structured as a purchase of assets, rather than a continuance of the acquired agency under a new name, a sufficiently aggrieved plaintiff may look behind the formalities to try to establish that the purchasing company is liable for mistakes made by the acquired party. Properly structuring this type of transaction can be the proverbial stitch in time that saves nine, or perhaps even $900,000.

Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader

  • All news coverage, best practices, and in-depth analysis.
  • Educational webcasts, resources from industry leaders, and informative newsletters.
  • Other award-winning websites including and

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.