Due Diligence & Liability Transfer?

searcher profile

September 30, 2025

by a searcher from Arcadia University in Forest Hill, MD, USA

Here's a question for discussion: What’s the one insurance due diligence red flag—beyond claims history—that every searcher must verify in the seller’s current and prior policies to avoid inheriting a six-figure, uncapped liability post-close? More concerns? Venture Risk & Insurance: www.venture-risk-insurance.com
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commentor profile
Reply by an investor
from University of Rochester in New York, NY, USA
There are many things but if just one, I'd have to go with diligence on the policy coverage & detailed policy language. I've seen multiple sellers who thought their E&O (Professional liability) was covered by the General Liability policy which had language that specifically excluded that exposure. If the buyer took the seller at their word, they would inherit six-figure+ exposure with no coverage. Happy to chat on other key areas redacted
commentor profile
Reply by a professional
from University of Central Florida in Ormond Beach, FL, USA
• Potential insurance audits for exceeding prior years exposures • Expecting prior policy premiums to remain consistent in the future – the policies reviewed may not include endorsements that occurred during the term • Understanding the insurance market conditions relating to the class of business of the acquisition • Looking into cyber coverage, crime, D&O and other exposures potentially not covered • Potential unseen Workers’ compensation experience mod issues – mod reviews are important • Sometimes agents make mistakes, and you need to verify the policies are rated correctly and the policy forms are strong • Fully shopping the marketplace to find a better deal is always good practice ###-###-#### if you have any questions
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