DENMARK Trends and Developments Contributed by: Thomas Weitemeyer and Jonas Høst, Moalem Weitemeyer
and incentives are no longer aligned. Several factors combine to make such claims more complex in prac - tice: • Heavier and more fragmented disclosure records, reflecting multiple workstreams, advisers, diligence rounds, layered data rooms and extensive Q&A logs. • More heavily negotiated policy terms and under - writing assumptions, including tailored exclusions and detailed knowledge and disclosure concepts. • More sophisticated loss models, often requiring forensic accounting and counterfactual analysis, particularly where the target business has been integrated post-closing. • Greater distance between the individuals who possessed relevant knowledge pre-closing and those responsible for pursuing or defending the claim later, especially where management changes shortly after completion. As a consequence, W&I claims in larger deals tend to turn less on whether a warranty breach exists in principle and more on evidential challenges: what was disclosed; what the insured’s deal team actually knew; whether the issue was material; whether the alleged breach caused the loss; and how loss should be measured. Pre-closing knowledge/disclosure Even where the SPA warranties are broadly drafted, W&I policies commonly contain knowledge-based limitations, for example excluding claims where defined members of the buyer’s deal team had “actu - al knowledge” of the relevant circumstances. In dis - putes, insurers typically scrutinise both the precise definition of knowledge (actual versus constructive, individual versus collective) and the composition of the relevant knowledge group. While these concepts are well established legally, dis - putes frequently turn on factual reconstruction rather than abstract interpretation. The absence of contem - poraneous internal correspondence, management communications or diligence materials can become decisive where insurers argue that the buyer’s deal team had prior knowledge or that the relevant issue was sufficiently disclosed. This risk is amplified where
historical documentation is dispersed across individu - als who have since left the business. Materiality and counterfactual analysis In W&I-related claims, the buyer will typically be required to establish not only that a warranty has been breached, but also that the breach is material in a commercial and contractual sense. This assess - ment is often a focal point of dispute where the SPA or the W&I policy does not contain a clear or exhaus - tive definition of materiality. In those cases, the buyer typically has to substantiate materiality using the facts and their impact on the business – for example, by showing how a defect affects the target’s products or operations, or by pointing to historical indicators such as an increase in customer complaints, warranty returns, product liability incidents, regulatory issues or other measurable adverse trends. In practice, buyers therefore seek to substantiate materiality by reference to concrete business impact rather than abstract non- compliance. This may include evidence that a defect adversely affects the target’s products, operations or regulatory standing, or reliance on historical indica - tors such as increased customer complaints, warranty returns, product liability exposure, regulatory findings or other measurable negative trends. Conversely, sell - ers and insurers frequently argue that the issue was isolated, already priced into the transaction or imma - terial relative to the size and risk profile of the deal. As a result, disputes over materiality in Danish arbitra - tion often turn less on legal doctrine and more on evi - dentiary robustness. The decisive question is whether the buyer can demonstrate, through contemporane - ous documentation, reliable data and expert analysis, that the breach had a sufficiently adverse impact to meet the applicable materiality threshold, rather than constituting a technical or commercially insignificant deviation. Causation and loss quantification (especially after integration) Where the buyer has integrated the target, changed pricing, replaced systems or reorganised the busi - ness, insurers will often argue that the buyer has made it harder to demonstrate a clear causal link between the alleged breach and the claimed loss. This can push the dispute towards forensic, documentation-
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