During the last 3 years, have you or any affiliate considered or been involved in any attempted or completed merger, acquisition, divestiture, or significant change in principals?

This question helps the insurance carrier assess the risk associated with recent or planned business changes such as mergers, acquisitions, divestitures, or significant changes in principals. These events can alter the applicant's operational structure, financial stability, or liability exposure, potentially impacting coverage terms or premiums for Errors and Omissions (E&O) insurance.

• What is a "Merger"? A business transaction where two separate companies combine to form a single new entity.
• What is an "Acquisition"? A transaction where one company purchases and takes control of another company.
• What is a "Divestiture"? The sale, disposal, or spin-off of a business unit, subsidiary, or asset.
• What is a "Significant Change in Principals"? A major change in the key personnel or ownership of the firm, such as the departure or addition of senior executives, primary owners, or key decision-makers who influence the company's operations and strategy.

To answer this question, you must consider all major business restructuring activities involving your firm or any affiliated entities within the last three years. This includes:

• Mergers: Have you combined with another company?
• Acquisitions: Have you purchased or taken over another company?
• Divestitures: Have you sold off any parts of your business?
• Change in Principals: Has there been a major shift in your firm's ownership or executive leadership?

You must disclose both completed and attempted transactions or changes. If you have been involved in any of these, answer "yes" and provide details. Otherwise, you can answer "no."

• Mistake: Believing only completed transactions need to be disclosed.
  • The question specifically asks about attempted and completed events. A failed merger or an acquisition that was considered but abandoned must still be reported, as it can indicate strategic shifts or risks.
• Pitfall: Not understanding what a "significant change in principals" means.
  • This isn't about routine employee turnover. It refers to major changes at the top of the organization that can alter its direction, culture, or risk management philosophy.
• Mistake: Forgetting to include the activities of affiliated companies.
  • The question applies to your firm and any affiliates. You must make a reasonable inquiry to include any relevant events from these related entities.
• Pitfall: Withholding information due to confidentiality concerns.
  • Insurers handle this information with discretion. Non-disclosure is a serious issue that can lead to coverage gaps, while disclosure allows the carrier to understand your firm's evolving risk profile and provide appropriate coverage.