Representations & Warranties (R&W) insurance covers unknown or latent breaches of a seller’s representations in a merger or acquisition.
Matters disclosed on a schedule to the purchase and sale agreement are not considered breaches. A policy may also cover a specific tax indemnity or allow erosion of the retention for other indemnified matters subject to the escrow. Such a policy can be issued to the buyer, providing first party coverage, or to a seller, providing third party coverage.