Canadian Lawyer

44 www.canadianlawyermag.com ily willing to use RWI than their Canadian counterparts; but that is certainly changing with each passing year as the pros and cons of RWI become more widely understood in the Canadian market." Irwin says that, as the insurance becomes the norm, some of the time spent in negotiat- ing representations and warranties has shift- ed toward time to allow underwriting. "The insurance companies typically use the same lawyers each time and they're very LEGAL REPORT CROSSBORDER "So, sellers are able to exit deals with, you know, only 10 or 20 per cent ongoing liabili- ty, and they can limit it to the insurance — or they can have that lesser exposure, post clos- ing. And, so, that's been a bit of a big change in the last five years in Canada." Traditionally, as lawyers at Osler Hoskin & Harcourt LLP put it, U.S. deal terms are typically more "pro-seller" than Canadian terms. While Canadian deals remain "more favourable to buyers" on average, Osler noted that there has been a convergence, with RWI trends marking "the most significant shift in the North American market since the death of the financing in the mid-2000s." "The familiarity of Canadian clients with RWI is generally dependent on how active they are in the M&A market. Active Canadian buyers and sellers — e.g., private equity funds, pension plans — will be as knowledgeable about and as comfortable with RWI as their counterparts in the U.S.," says ffrench. "Out- side of financial sponsors and other active participants, very generally speaking, it would be fair to say that American buyers and sellers tend to be more familiar with and more read- efficient. It means you need to build about an extra week into your schedule in order to get the insurance company up to speed and allow them the opportunity to underwrite the insur- ance," says Irwin. "Usually, you have that week anyways. But it's another parallel track to undertake as you as you look to get a deal signed up." On the other hand, ffrench has found the efficiency of insurers works in his favour as far as deal timelines go. The allocation of time 19.4% Representations and warranties insurance policies that received a claim notification in 2018 33% Claim notifications that are made within the first six months after policy inception 45% Share of North American claims submitted after 12 months, due to escrow funds being released (AIG.ca) WHAT'S MARKET FOR RWI CLAIMS "Even on deals in Canada that aren't using the insurance, we're seeing those [indemnity] cap numbers come down." Jake Irwin, McCarthy Tétrault LLP

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