Offered as a conversation starter about market structure. It names no firm and does not suggest that any broker, insurer, or advisor has done anything wrong. Notes at the end.
The setup
On many deals one brokerage wears three hats. It runs the insurance diligence on the target. It places the go-forward commercial program at closing. And it brokers the representations and warranties policy that sits over the transaction. The first two belong together; the firm that finds the gaps is the natural firm to fill them. The third belongs somewhere else, for a reason that surfaces only at claim time.
What the policy is for
RWI took over the job the seller’s indemnity used to do. When it first replaced the escrow it was a hard sell; deal lawyers negotiated the indemnity to the comma because everyone understood that recovery had to be precise, with no roadblock between the loss and the money. The policy inherited that job. It did not inherit the same precision about who would carry the claim when the day came.
The mechanism
A broker whose only role is the policy has one file. If the policy fails to respond, that is its exposure, so its interest and yours run the same direction. On the policy file, the broker’s self-defense and your coverage argument are the same sentence: the policy should respond.
Add the other two hats and a second file appears, and on that file the sentences run opposite ways. When the insurer answers that the company’s own program should have paid, or that the insurance review showed you the problem, your best position is that the program had a gap, or that the review could not have caught it. The firm that built that program and wrote that review has a different best position. One firm, one claim, two incompatible arguments. None of this requires bad faith. It is a question of which way the exposure points.
You claim on the RWI.
The policy typically sits excess of the company’s commercial property and casualty insurance, and the insurer keeps its right to subrogate.
The insurer’s answer points at work your advisors did.
“The P&C program should have paid.” “The review showed you knew.” And after it pays: “We will recover from whoever is responsible.”
Your RWI broker did that work.
Its advocacy for you is limited by its need to protect itself from that downstream liability: notice to its own insurer, counsel, no admissions.
The integrated model.
Your RWI broker did none of it.
The only file of its own in the room is your policy. It can make your argument plainly.
Independence.
Why this is not rare
The standard objection is that insurance-representation breaches are a small share of RWI claims. True, and beside the point. The conflict rides on two provisions that are live in a large share of contested claims whatever the breach category.
Recovery and netting. Loss definitions typically credit amounts recovered, and some forms amounts recoverable, from other sources, and insurers commonly position the policy behind other valid and collectible coverage. Any breach that produces a loss the company’s own program might have absorbed, property, environmental, product, employment, cyber, the litigation nobody scheduled, puts that program in issue.
Knowledge and disclosure. The underwriter reads the buyer’s diligence, the insurance report included. When an insurer raises a knowledge defense, the fight is about what the deal team’s advisors knew and wrote, and the author of the report is not a disinterested witness on that question.
This is not most claims. It is the subset where the program matters, which is anything with a plant, a fleet, or a patient, and those are the claims where the program’s design decides the number.
What happens next
When a claim implicates a firm’s own work, its professional liability policy expects it to protect its file: notify its carrier, route communications through counsel, admit nothing. That is prudent, and the firms you hire run the same protocol, this one included. The firm still argues breach and quantum for you. What it stops arguing is the one question where its own work is in issue, and that question often decides the number.
If the insurer pays anyway, the fight migrates. You typically owe the insurer cooperation in pursuing other sources of recovery, and that pursuit runs toward the underlying program and the professionals who built it, while the same firm often still holds your renewal.
What you will hear
“Separate teams, information walls.” Walls are organizational; exposure is contractual. Ask which entity signed the diligence report, which entity is placing the policy, and whether one professional liability program insures both. A wall also cuts against you: an RWI team that cannot see what the diligence team knew is not much use in a knowledge dispute.
“Splitting the roles costs money and time.” It costs little, not nothing: one more NDA, one more seat in the data room, a coordination call. Brokerage on the RWI comes out of the premium whichever firm places it; you are choosing who earns it. The report goes to the underwriter whoever wrote it, and you already run counsel, quality of earnings, tax, and insurance diligence on separate tracks.
“Coverage counsel is the real advocate.” Counsel argues from the file, and the facts about the program and the diligence come from the firm that is now under protocol.
“Good drafting fixes it.” Insist on actual-recovery crediting and no-delay language. They help, and the fight still migrates to recovery.
“It takes a team to place an RWI.” It took a team when the work was manual, and the separate fee dates from then. Modern tools have removed most of that labor from the placement. They did not remove the judgment, and in much of the market the fee has not followed the labor out.
“Our data lets us negotiate better.” A large book is worth something at the table. A wholesale platform’s book is drawn from placements across many brokers rather than one firm’s, and its pricing and terms benchmarking come with our placement.
Three questions
Ask for facts, not intentions. Which entity authored the insurance diligence, which is placing the policy, and does one professional liability program insure both? If the insurer reduces or denies on the ground that other insurance should have responded, who signs the letter arguing your side, and will the firm say so in writing before you appoint it? After the insurer pays and pursues recovery, whose file does that pursuit reach?
A brokerage with a real answer can give it. If the RWI broker’s name is on anything in the claim file other than the policy, place the RWI elsewhere.