On Jan. 15, 2021, a New York state court judge issued an opinion denying an insurer’s motion to dismiss a claim for coverage under a representations and warranties insurance (RWI) policy in WPP Group USA, Inc. v. RB/TDM Investors, LLC et al. More specifically, the court rejected the insurer’s argument that the claim was subject to certain exclusions under the policy and ordered the parties to proceed with discovery.
The court’s decision is interesting in several respects — not the least of which is that judicial opinions relating to RWI policies are quite rare. RWI policies are generally purchased by transactional buyers seeking to guard against misrepresentations made by sellers during the acquisition process without having to seek recourse against the sellers themselves for any potential losses. Typically, these policies provide that any disputes concerning an insurer’s coverage or payment obligations are to be resolved in confidential arbitration proceedings that do not generate public opinions. The RWI policy at issue in WPP Group, however, provided the insured with the option of bringing claims regarding the policy in either confidential arbitration or in New York state or federal courts.