IBNR Escrow Deposit Clause Samples
The IBNR Escrow Deposit clause establishes a requirement for the buyer or seller to set aside funds in escrow to cover Incurred But Not Reported (IBNR) liabilities, typically in the context of insurance or claims-based transactions. This clause ensures that a specified amount is held in a neutral account to address potential claims that may arise after the transaction closes but relate to events that occurred prior to closing. By mandating this deposit, the clause protects the parties from unforeseen liabilities and allocates financial responsibility for such claims, thereby reducing post-closing risk and disputes.
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IBNR Escrow Deposit. The IBNR Escrow Deposit will be held by the Escrow Agent until the first anniversary of the Closing Date (the “IBNR Escrow Period”) and will be paid to the Company during such period to the extent that any Seller incurs any Liabilities following the Closing Date in respect of any claims under a group health or flexible spending plan of Sellers that were incurred but not yet reported or paid as of the Closing Date (“Eligible IBNR Claims”). The Escrow Agent will cause to be paid to the Company the amounts necessary to satisfy all Eligible IBNR Claims payable prior to the end of the IBNR Escrow Period, up to the aggregate amount of the IBNR Escrow Deposit. Upon the expiration of the IBNR Escrow Period, the remaining balance of the IBNR Escrow Deposit, if any, will be paid to the Company; provided, however, that to the extent the aggregate amount of all Eligible IBNR Claims under a group health plan (but not a flexible spending plan) paid prior to such date do not exceed $300,000 (the amount of such shortfall, the “IBNR Shortfall”), a portion of the remaining balance of the IBNR Escrow Deposit equal to 50% of the IBNR Shortfall will be paid to Buyer (and the remaining balance of the IBNR Escrow Deposit will be paid to the Company).