also mention here that both the buyer and seller may
have potential E&O exposure that must be considered.
Obviously, some of the exposure will be managed by the
indemnification clause in the agreements as discussed
above. However, the seller should always seriously consider
the purchase of tail coverage for any potential E&O claims
that arise before the sale. Due to the fact that the statute of
limitations for an E&O claim may be as long as six years, the
recommended practice is to purchase a tail policy providing
coverage for six years after the sale takes place. The buyer
on the other hand must always make sure that its E&O
carrier is aware of the purchase, and the acquired agency/
brokerage must be added to their E&O policy.
selecting the right counsel
Choosing the appropriate counsel to assist with the
transaction can save substantial time and money in the
purchase and sale of an insurance agency/brokerage or
book of business. Getting the lawyer involved earlier rather
than later is always prudent and avoids the situation where
the client believes all necessary items have been agreed
upon. Doing so also helps prevent the misunderstanding
that all that is needed is to “formalize” the agreement
in writing – only to discover that counsel on both sides
have raised additional questions and concerns for the
protection of their respective clients. The clients then may
be frustrated when they realize that the agreement they
thought was all but completed still needs to be finalized.
The involvement of an attorney at an earlier date