The offer mentions representations and warranties insurance. What question does the policy answer? Aon’s undated service description concerns covered losses from breaches of specified representations and warranties in an acquisition agreement. That is a defined starting point for a review, rather than a promise to insure every disappointing business result.
Use the sections below in order, then complete the record at the end. Keep one issue per entry so your next adviser conversation starts with a specific question.
1. Identify who makes the promise and who claims
Miller Thomson’s July 16, 2026 explanation distinguishes two routes. With buy-side insurance, the buyer claims directly against the insurer for covered breaches. With sell-side insurance, the seller remains liable to the buyer and seeks reimbursement for covered indemnity payments. Record the insured party and payment route before comparing limits.
Name the acquisition agreement, the representation under examination and the relevant policy. Connect the alleged breach to that representation. This entry follows Aon’s stated scope; whether the particular loss qualifies remains a separate question.
2. Read both versions of the promise
Osler’s December 2020 discussion describes policies that treat representations as though extra words were present. One example adds “in writing” to a representation about receiving notice; another adds a knowledge qualification. The first changes the insured representation, not the deadline for notifying an insurance claim.
Copy the agreement wording beside the policy’s treatment. Highlight the changed words and ask counsel what difference they make for the concern being discussed. Osler also describes exclusions emerging after underwriters reviewed the business and diligence. Compare the wording, not just headings.
AIG’s historical Canada highlight sheet describes buyer-side coverage that can extend beyond the agreement’s representation-survival period. Put the two sets of dates beside their actual clauses. The brochure describes a capability; your policy and agreement must establish the dates that apply to your transaction.
3. Separate the purchase cost from the loss layers
Marsh’s 2020 brochure identifies premium, taxes, underwriting fees and broker compensation among policy costs. Give those their own budget entries. Then record the retention and limit separately, so the amount paid to obtain insurance is not confused with a loss allocation. Use the actual quote for the cost entries; this historical brochure supplies no current price for your deal.
Miller Thomson describes the retention as the loss layer absorbed before insurer liability, and the limit as a ceiling on covered recovery. Parties may allocate retention and sometimes above-limit liability. Find their agreed allocation.
Stikeman Elliott’s October 2013 explanation treats the interaction between policy retention and an agreement deductible as negotiable. Ask whether one includes the other before adding the figures. A similar-sounding label is not the calculation.
The historical AIG sheet also gives an anonymous example of buy-side insurance above a deductible funded by a reduced seller escrow. Both appear in that example. Keep escrow arrangements visible in the comparison instead of crossing them out merely because insurance appears elsewhere.
4. Work three separate fictional scenarios
In A and B, assume qualifying covered losses and satisfied claim conditions. Each scenario starts with an unused limit.
Actual terms determine coverage and allocation.
All figures below are invented Canadian-dollar inputs. The chosen retention is C$200,000 and the insurer limit is C$2,000,000. No premium, interest, tax, offset or other adjustment is included. These are independent illustrations: nothing used in A reduces the starting figure in B or C.
A: C$600,000 qualifying loss
Begin with C$600,000. Subtract C$200,000: the remainder is C$400,000. That is below C$2,000,000, so the model’s insurer layer is C$400,000. For this example only, the fictional agreement assigns C$100,000 of the retention to the seller and C$100,000 to the buyer.
Check the addition: C$100,000 + C$100,000 + C$400,000 = C$600,000. All of the chosen input is accounted for.
B: C$2,500,000 qualifying loss
Start again with the full unused C$2,000,000 limit. C$2,500,000 minus C$200,000 leaves C$2,300,000. Allocating C$2,000,000 to the insurer layer leaves C$300,000 above the limit.
The check is C$200,000 + C$2,000,000 + C$300,000 = C$2,500,000. This model leaves the last C$300,000 unassigned between buyer and seller. It is a blank allocation to resolve, not a missing arithmetic step.
C: C$600,000 expressly excluded loss
Reset again. This example expressly assumes exclusion of the entire C$600,000. The numerical record is C$0 in the insurer layer, with C$600,000 unassigned. Its inputs differ from A, despite the identical loss number.
An expressly excluded loss receives no insurer payment in this model.
The calculations do not establish entitlement or cash received. Actual policy language must supply the coverage terms.
An excluded or above-limit amount needs its own agreement analysis.
5. Connect diligence findings to unanswered coverage
Miller Thomson warns that incomplete purchaser diligence can produce broad exclusions. It identifies known breaches or liabilities, purchase-price adjustments and forward-looking representations among common exclusions.
Osler’s 2016 process map describes insurer review of transaction documents, diligence and disclosures, followed by an underwriting call about findings and the buyer’s response. It also includes a pre-closing bring-down discussion and updates on agreement amendments, diligence and material intervening matters.
Use that dated workflow to prepare an issue list: what was found, what was supplied, what changed and what still needs an answer. An unresolved entry should travel with the question rather than disappear between versions.
NFP’s undated service description says it reviews diligence and underwriting documents, works with legal counsel on coverage issues and negotiates exclusions. That describes the provider’s role. NFP belongs to Aon; the two descriptions are not independent evidence of market-wide practice.
For your review meeting, identify the report and passage that raised the issue. Ask the broker and counsel to connect it to the insurer’s question or proposed exclusion, and name who will obtain the missing answer.
6. Prepare a claim record, not just an allegation
AIG’s undated M&A page offers anonymous claims examples. In one financial-statements case, forensic accountants investigated alleged breaches and measured loss; AIG says it paid after assessing supporting documentation. In another scenario, missing evidence complicated loss quantification despite confirmation of a breach. These are the insurer’s global/EMEA examples, not named Canadian deals or forecasts of your recovery.
Keep two questions separate in your file: what supports the alleged breach, and what supports the amount claimed? Attach the relevant record to each. A persuasive account of what went wrong does not itself fill in the numerical evidence.
Osler’s 2016 map directs readers to policy procedures and a broker walkthrough. Aon describes advocacy from initial notice through insurer resolution.
Stikeman’s 2013 explanation also identifies subrogation rights and the effect of knowledge as negotiation issues. Put those terms on the document-review list. Do not infer a universal fraud waiver or insurer right from the label.
7. Complete the decision record with your advisers
Use these short entries on a phone or in a shared document. Add a clause locator, the person responsible for the answer and the next action to each.
Promise and policy treatment. Agreement wording: ___. Policy treatment: ___. Remaining seller indemnity: ___. Highlight any wording difference. For an identified issue, record insured, specifically excluded or unanswered; locate the agreement provision addressing remaining risk.
Cost and funding. Premium: ___. Taxes: ___. Underwriting fee: ___. Broker compensation: ___. Beside each, record the actual quote and who is to pay. Keep this budget separate from the retention, policy limit and any escrow entry. Marsh’s dated list supplies categories, not current amounts.
Retention interaction. Policy retention: ___. Agreement deductible: ___. Does the policy include that deductible, or is it separate? Record the negotiated treatment and its clause before adding the amounts.
Procedure. Locate notice recipients, contents and timing with broker and counsel; ask whether cooperation or settlement-consent terms apply. Record clauses and unresolved answers, not assumed duties.
Dates and availability. Agreement survival: ___. Policy period: ___. Relevant clause: ___. AIG’s historical sheet makes coverage subject to policy language and notes it may not be available in every province or territory. Confirm the proposed placement rather than treating a brochure as eligibility.
Filled fictional entry from B. Issue: C$300,000 above the model limit. Allocation: unassigned. Document locator: not supplied in this invented example. Decision owner: counsel.
Next action: identify the proposed buyer/seller allocation and the wording that records it.
Checkpoint. Quote received: ___. Negotiated policy: ___. Claim payment: ___. Record the document and unanswered issue at each. Completing one checkpoint does not establish the next.
For general information and education, not legal, tax, investment or valuation advice. Reported transactions do not predict your business’s value, financing terms or sale outcome. Consult qualified advisers about your situation.
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