errors and omissions insurance Errors and Omissions Insurance for Mergers and Acquisitions | Axis Error & Omission
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Errors and Omissions Insurance for Mergers and Acquisitions


 

If you have an Errors and Omissions insurance policy for your business, it is important to know, particularly in this economic climate, how that policy might be affected in the case of a merger or acquisition. A definition of change in control can vary from plan to plan. Some E&O policies classify a change in control with as little as a 25% change in ownership of voting stock as opposed to the standard 50%. These issues must be monitored closely, as a change in control can prompt some immediate and significant changes in your E&O policy. Your policy may terminate completely, or it may stay active but not cover any claims subsequent to the date of ownership exchange. In addition, the insured is only given a limited amount of time to notify their E&O carrier regarding the merger or acquisition, and subsequently must pay any premiums for an extended reporting endorsement within 30 days. If you have not notified your carrier within the allotted time period, you run the risk of not being covered for claims reported in the future that occurred while your policy was active. It is common for the acquiring company to increase E&O coverage for a purchase on their own policy. To avoid future uncovered claims, it is vital that that new owners thoroughly review all policy provisions, named insureds and covered professional services with their broker and their acquired company, and make sure that these items are properly listed on their new policy. As each company is different, it is important not to make assumptions regarding an E&O policy.

 

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Blogged on: July 20, 2011 by Mike Smith
Error Omissions
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