Nursing Home Transactions – Warranty and Indemnity Insurance


Guarantee and indemnity insurance (W&I Insurance) has been used for many years to cover unknown and unforeseen losses suffered by buyers in connection with warranty or compensation claims resulting from merger and transaction transactions. acquisition. With the rise in interest and investment in the Irish nursing home industry and the resulting market consolidation and increasing transaction value, this insurance product is being considered more frequently to facilitate smooth execution. , fast and effective.

All acquisition agreements will include guarantees by which the seller guarantees or confirms the status and affairs of the target company or retirement home business at the time of signing the acquisition agreement. If any of the guarantees given by the seller prove to be false, and provided that the matter has not been previously disclosed to the buyer or his advisers during the due diligence process, the seller must reimburse to the purchaser the difference between what he paid for the retirement home and what it is actually worth in light of the breach.

A seller may also be required to indemnify the buyer against fundamental risks or liabilities identified by the buyer or his advisers during the due diligence process. In this case, the seller is obliged to repair, on a euro for euro basis, the liability or the costs for the buyer or the target company resulting from these facts.

Additionally, in some situations, a buyer may insist on withholding part of the purchase price or putting a certain amount in an escrow account for a period of time until they are satisfied that sufficient time has elapsed. elapsed to enable him to discover a warranty claim or his right to assert warranties or indemnities expires.

W&I Insurance can provide a real solution when the above issues are examined and negotiated. The policy can be structured to compensate either the seller or the buyer. In retirement home transactions, the current trend is for a buyer to get W&I insurance.


The main advantages of W&I Insurance in the context of nursing home transactions are:

  • With increased competition to acquire assets from Irish retirement homes, a buyer can improve their offer and quickly take the next step in an auction process by introducing W&I Insurance,

  • Since the insurer assumes the risk that would otherwise fall on the seller, this allows the seller to make a “clean break” and receive the full amount of the purchase price without additional costs or delays, which can arise in the event of a warranty. or a receiver,

  • The buyer has the additional comfort that he can claim directly against the insurer, without having to worry about the solvency of the seller after completion of the transaction. This may be particularly relevant where there is a non-business seller or a non-Irish seller who is no longer doing business in Ireland after the transaction has been completed, and

  • When a seller remains in an advisory role after completion or the retirement home management team does not change after the transaction is completed. W&I Insurance eliminates warranty breach claims between seller and buyer, thus maintaining the relationship between the parties who continue to work together to manage the retirement home.


The main disadvantages of W&I Insurance are as follows:

  • The insurer is required to be involved in the transaction which results in another set of costs, potential delays and additional transaction hurdles to be overcome as the relevant documents have been agreed, and

  • The coverage offered may not be sufficient to completely eliminate the seller’s risk. It will depend on the circumstances of the particular transaction. Insurers tend to be reluctant to cover certain areas of risk, especially when a known probable liability has been identified.


A number of trends have emerged in the W&I Insurance landscape. These include:

  • Sellers and buyers strategically use W&I Insurance in the retirement home auction processes. Some sellers ask the buyer to include W&I Insurance in their offer. Other buyers introduce the concept themselves to improve their offer. In addition, from time to time, a seller will contact a W&I insurance broker prior to the start of the auction process to obtain indicative terms, on price and coverage, from a number of willing insurers with the. intention that the W&I insurance policy be taken out. by the preferred bidder / buyer,

  • Traditionally, W&I policies have included a “deductible” or “deductible”, which is the certain minimum value of insured losses before a claim can be made. However, W&I insurance providers are now willing to offer a ‘zero deductible’ which allows the insured to claim on and from the first euro of any loss suffered,

  • Many W&I insurance providers also offer “synthetic” tax acts in appropriate situations which can prove very useful when a seller is unwilling or unable to accept tax obligations on an indemnity basis. . In such circumstances, the tax act is concluded between the insurer and the buyer, rather than between the seller and the buyer,

  • “Knowledge scratches” and “materiality scratches” are also increasingly common in W&I insurance policies. These have the effect of removing certain qualifiers of knowledge / awareness and materiality of the guarantees included in the acquisition agreements. As a result, the warranty is not eligible for the purposes of a claim under the W&I insurance policy, and

  • W&I insurance policies may include extended warranty periods, i.e. longer than those agreed between the seller and the buyer in the purchase contract.


Despite the impact of the COVID-19 pandemic on nursing homes in Ireland, the market for transactions in the sector continues to be vibrant as international investors continue to drive industry consolidation. When a W&I insurance provider is satisfied that the parties have undertaken a sound and appropriate due diligence and disclosure exercise, a W&I insurance policy can be a cost-effective and straightforward solution to situations that in the past have required. may have taken a long time to negotiate or even threatened the transaction. The growing popularity of W&I Insurance has resulted in lower premium rates and broader coverage. While W&I Insurance may not be appropriate in all cases, it certainly deserves special consideration when considering a retirement home transaction, especially in an auction scenario.


About Author

Comments are closed.