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R&W insurance provides coverage for losses associated with the breaches of the seller's representations and warranties made in an acquisition or merger transaction. (Photo: Shutterstock) R&W insurance provides coverage for losses associated with the breaches of the seller’s representations and warranties made in an acquisition or merger transaction. (Photo: Shutterstock)

For several years, buyers and sellers in M&A deals have been turning to representations and warranties (R&W) insurance to allocate risk — and they continue to do so during these unprecedented times. Yet, despite the increasing prevalence of R&W insurance, myths and misconceptions remain. When they are debunked, buyers should have a clearer understanding of the benefits that R&W insurance can bring to a deal.

Here are five myths about R&W insurance dispelled.

Myth No. 1: R&W insurance policies will not cover the seller’s fraud.

Because R&W policies are designed to cover breaches of a seller’s and an acquired company’s R&Ws, the policies will likewise cover fraudulently made representations. What is critical for the buyer to do to trigger coverage is establish that a breach occurred, regardless of how or why it occurred, i.e., inadvertently or intentionally.

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