Introduction: The buyer of oil and gas produced water treatment and disposal facilities, who had a representations and warranties policy, claimed that the facilities and wells were not as represented. Baker & O’Brien evaluated the technical merits of this claim by reviewing facility design, well completions, and operational performance from both pre- and post-acquisition periods. We opined on facility functionality in the ordinary course of business in an initial expert claim assessment, a preliminary expert report, and with follow-up analysis.

Representations and Warranties (R&W) insurance is frequently utilized in large M&A (merger and acquisition) transactions to protect parties against financial losses resulting from breaches of representation and warranties in purchase agreements. This coverage transfers risk from transaction parties to insurers, providing protection when stated representations prove inaccurate during or after acquisition completion.

A significant R&W insurance claim arose following the acquisition of multiple oil and gas produced water treatment and disposal facilities. The claim alleged substantial losses due to facilities and disposal wells that failed to conform to contractual representations. The dispute encompassed extensive technical issues across pipeline systems, water treatment and injection equipment, utilities infrastructure, and saltwater disposal wells. As claimed, these deficiencies created substantial operational and financial challenges, leading to a complex insurance claim requiring detailed technical evaluation.

Baker & O'Brien was retained to conduct a comprehensive technical assessment of the claim's merits. Our evaluation involved analyzing engineering design, installation standards, and operational characteristics of the acquired facilities, along with a detailed review of disposal well permitting, drilling, completion, and operational performance data. We examined documentation from pre- and post-acquisition periods to determine whether facilities met stated representations and could function within the ordinary course of business. Our work produced expert reports, including initial technical evaluations, preliminary findings, and responsive analyses. These technical assessments were conducted during pre-arbitration proceedings and helped facilitate a settlement between the parties.