On a nil-recourse RWI structure, the seller's ongoing indemnity obligation is gone by design — but the policy's own exclusions, built from what diligence actually flagged, step into its place and can leave the buyer with no recourse at all on a known issue.
Short answer
On a typical nil-recourse RWI structure, yes — the seller carries no ongoing indemnity obligation at all, and the buyer's entire post-closing protection moves onto the insurance policy as underwritten, which means a matter flagged and discussed during underwriting is exactly the kind of known issue the policy is structurally built to exclude.
No statute sets what a representations and warranties insurance policy must or must not cover. The governing document is the insurance contract itself, together with the underwriting record created before it bound — not the purchase agreement, and not any general duty running from the seller, who by design carries no ongoing obligation on a nil-recourse deal at all.
Flagging an issue in diligence protects the buyer during negotiation, but the same act of flagging is what converts that risk into a known matter for underwriting purposes — and known matters are what RWI is structurally built to exclude. The Insurance Act, R.S.O. 1990, c. I.8, does not help here: its statutory conditions are enumerated by class — fire, automobile, accident and sickness — and a specialty representations-and-warranties policy is not one of them, so the statutory conditions regime does not apply to it.
A synthetic or buy-side RWI policy negotiated with a live seller indemnity sitting behind it — rather than a pure nil-recourse structure — keeps a fallback for exactly the known-issue exclusions RWI cannot cover. Whether that structure is available, and at what premium, is a negotiation the parties have before signing, not something a buyer can add back in after a claim is denied.
These questions come up because a specific deal turned on them. Three from this hub:
A 30-minute call is enough to tell you whether AI pays for itself here.
Canadian small-business transaction data is not published anywhere, so most valuations in this country quote an American benchmark. The Deavo–Treadstone Acquisition Index is a daily record of Canadian listings built to replace that: asking-price distributions by province and city are published now, and days on market, departure rates and asking-to-sale spreads follow as the series lengthens. Leave an email and we will tell you as each measure lands.
No pitch, no listings. One email when the first report lands.
