Deal Point: A vendor is preparing to enter into a contract with an entity that is operating under bankruptcy protection. The size of the contract is significant to the vendor but is not significant to the bankrupt entity’s total receivables. The vendor has requested that the contract be approved by the bankruptcy court overseeing the bankruptcy as being “in the ordinary course of business.” The customer does not feel that the contract is significant enough to seek bankruptcy court approval, nor does it view there being any risk that the contract will not be viewed as being “in the ordinary course of business." While the vendor agrees that the risk of such a determination is not significant, the impact of such a determination would create an adverse financial situation for the vendor.

Transactional Insurance Solution: A $10,000,000 Clawback Insurance policy is issued to the vendor providing protection for legal fees associated with a legal challenge to payments received by them in connection with their performance under the contract by reason of these payments being characterized as not “in the ordinary course of business.”