By Brian Pilarski, Commercial Insurance Advisor, Brown & Brown of Detroit
Over the past few years, with improved economic conditions and better run companies, we have seen a lot of sales, mergers, and acquisitions. As a business owner, hundreds of “to-dos” arise during the sale. One important “to-do” is to inform your property and casualty insurance agency- don’t let this fall through the cracks!
Here are some quick tips on insurance necessities if you are selling your business:
- Provide Notice to Agent Timely: The agent can be held to a confidentiality agreement (NDA) and help discuss exposures throughout the due diligence process. A few days prior to closing is too late. Consider informing your agent as soon as the potential deal turns serious.
- Consider “Tail” Purchases: Claims-made policies often contain a “change in control” provision that trigger when 25% or more of the business ownership changes. Upon the sale, consider a “tail” policy to keep the opportunity to turn in an unknown future claim onto the previously in-force policy.
- Reps & Warranties Coverage: Buy-side and sell-side insurance on reps and warranties (select warranties can be lasered in or out) are available for almost all size deals in today’s market. If the sale is more than $5 million, consider your protection options.
- Go-Forward Concerns: Consider what the new entities look like and what go-forward insurance policies should be purchased.
- Trusts; Personal Liabilities: Capital events require more strategic tax and estate planning, often involving trusts. Ensure any newly formed trusts are named on personal insurance policies or contemplated.
- Increase Personal Protection: Consider a personal insurance umbrella or higher limits of protection. News of the sale could invite frivolous lawsuits. Or, more travel out of the country could create new exposures.
- Board and D & O Coverage: If you sit or will sit on outside boards, let your agent know to ensure you have coverage for the advice offered to the boards. Often, this can be covered on an umbrella if the board position is a non-comped seat.
Brown & Brown of Detroit is committed to providing clients with a superior insurance program, including proper coverage as well as comprehensive risk management and advising. If you have questions regarding the potential sale of your business, please contact a Brown & Brown advisor at 586.977.6300.