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After any merger or acquisition, disputes can arise regarding the accuracy of representations and warranties that the seller made to the buyer. In some deals, the buyer obtains representation and warranty insurance to provide coverage to the buyer in the event that the seller has breached a representation or warranty in the agreement between the buyer and seller. When an RWI policy provides coverage, sellers may attempt to offset their obligations to buyers by amounts paid by the R&W insurers. Likewise, R&W insurers may attempt to do the same for post-contract damages paid by sellers to buyers. But such offsets are far from a foregone conclusion.

To begin with, the contract documents may not even allow for any offsets. The transaction agreement between the buyer and the seller may not include provisions that would allow the seller to offset amounts it owes by amounts paid by an R&W insurer. Likewise, the RWI policy will not necessarily include provisions allowing an insurer to offset amounts it owes by amounts paid by the seller.

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