The seller’s case, in brief
For a seller, the questions are what liability survives closing and how much of the proceeds stays tied up. When the buyer carries RWI, the seller may be able to agree to a reduced or eliminated indemnity and a smaller escrow or none, receiving more of the proceeds at closing. The buyer looks first to its policy for covered breaches. RWI does not eliminate the seller’s liability for its own fraud. Coverage and retained liabilities depend on the policy and transaction documents.
Sellers can raise RWI at launch. Inviting bidders to consider it can narrow indemnity negotiations and make bids easier to compare. Who bears the cost of the policy is a negotiated term.
A different product exists for some smaller deals: the seller can insure its own liability for covered breaches. That is seller liability protection, not buyer-side RWI. It protects the seller. Seller liability protection does not give the buyer the same direct insured rights as a buyer-side policy. Any escrow or other recourse must be negotiated separately.
At process launch
- Decide whether to invite bids that assume buyer-side RWI.
- Prepare the disclosure and data room so underwriters can work quickly.
- Set your position on who pays the premium and underwriting fee.
- Compare the indemnity and escrow you would give with and without RWI.
- Agree how fraud, known issues, and other uninsured matters are allocated in the purchase agreement.
- Map underwriting into the timetable before signing.
Worked comparison. An escrow holds back part of the price for the survival period. Weigh the time value of that capital, and the risk of claims against it, against the share of the RWI cost you agree to bear.
Educational summary only, written for this page. Nothing here is an offer of insurance, legal advice, or a quote; availability, pricing, and coverage depend on underwriting and the terms of the policy actually issued.