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How Italian Civil Code warranty traps create coverage gaps that standard buyer-side W&I policies cannot close — and what UK acquirers must do before signing
The SPA has been negotiated for three months. The W&I insurer has underwritten the reps. Closing is imminent. Then, six months after completion, your due diligence team finds a defect in the target's title to a key asset. You notify the insurer. The insurer asks a single question: did you notify the seller in writing within eight days of discovering the defect? You did not. Cover is gone — not because of an exclusion schedule, but because an Italian Civil Code rule invalidated the underlying warranty claim before the insurer even opened the file.
This is the costliest mistake UK acquirers make on Italian deals. It happens because warranty and indemnity insurance in Italian M&A has been deployed almost wholesale from LMA-form UK precedents, with minimal adjustment for the Italian statutory framework that governs the underlying warranties. Chambers Corporate M&A 2026 (Italy) confirms a sharp increase in buyer-side W&I policies on Italian transactions, including growing use of management warranty deeds where a seller declines to give full business warranties. Market uptake has outpaced awareness of the gaps.
In structural terms, yes. The buyer-side policy reimburses the buyer for losses flowing from a breach of seller warranties in the SPA. The insurer steps into the seller's position. The seller receives a clean exit. Retentions, survival periods and exclusions follow the same broad architecture as an LMA-form policy.
In substantive terms, no — and the difference is material. Under English law, the SPA warranties are creatures of contract. The parties can extend or shorten limitation periods, define the notification mechanics, and set the remedy regime almost without restriction. Italian law does not work that way. The Italian Civil Code (codice civile) imposes mandatory rules on certain warranties that override whatever the parties have written. An SPA term that purports to extend or waive those rules is void. The W&I policy, which is priced and structured on the assumption that the SPA warranties are enforceable, therefore contains gaps that no amount of negotiation between buyer and insurer can close.
Article 1495 of the Italian Civil Code sets an eight-day period within which a buyer must give written notice of a defect to the seller once the buyer discovers it. This is not a long-stop claim period: it is a condition precedent to the right to claim at all. Miss it and the warranty claim is extinguished. Not time-limited. Extinguished.
The eight-day rule applies to what Italian courts characterise as garanzie legali — the statutory warranties implied by law on the sale of goods and, by extension, to share transfers where the buyer argues the shares did not match what was sold. It does not operate as a separate contractual notification right: it is a substantive requirement written into the Civil Code, and Article 1495 expressly states that the parties cannot agree to waive or extend it.
For a UK solicitor familiar with SPA4 reps, this is a structural shock. Under English law a buyer's notification to an insurer — typically 30 to 60 days from discovery — is the operative deadline. The Italian notice-of-defect obligation to the seller is an entirely separate, shorter, and a stricter requirement that must be satisfied before any insurer deadline becomes relevant. A buyer who notifies the insurer on day 40 but failed to notify the seller on day 9 has already lost the underlying claim that the policy is meant to cover.
This is where Italian case law creates the most significant — and least publicised — coverage trap.
Article 1495 pairs the eight-day notice rule with a one-year limitation period running from delivery. For claims characterised as garanzie legali, this one-year bar is also mandatory: it cannot be extended by contract. A standard W&I policy survives 18 to 24 months from completion. On a share acquisition that closes in January and where a breach is identified in month 20, the insured buyer may find that the underlying warranty claim is already time-barred before the claim is presented.
The critical question — and the one Italian courts have not resolved consistently — is which warranties fall under the one-year regime and which fall under the general ten-year contractual limitation period under Article 2946 of the Italian Civil Code.
The Milan Court of First Instance (Tribunale di Milano) has repeatedly characterised business representations in an SPA — including accounts warranties, tax warranties and title to assets — as ordinary contractual obligations subject to the ten-year bar. On that analysis the one-year trap does not apply to the core reps that W&I policies are designed to cover, and the extended survival period works as intended.
The Italian Court of Cassation (Corte di Cassazione) has taken a less predictable line. In a number of decisions the Court has applied the garanzia legale framework to share transfers where the buyer's complaint was that the shares did not correspond in substance to what was described — effectively treating the business reps as an expression of the implied statutory warranty rather than as purely contractual obligations. Where that characterisation is adopted, the one-year bar applies and the W&I policy survival period is irrelevant.
No binding Supreme Court ruling has settled this split definitively. The outcome turns on how the claim is framed and which Italian court hears it. For deal purposes, that uncertainty is itself a coverage gap.
Nemo plus iuris ad alium transferre potest quam ipse habet — no one can transfer more rights than they themselves hold. This maxim encapsulates the structural limit of W&I cover on an Italian deal: the policy can only reimburse a loss arising from an enforceable warranty. Where the Civil Code rules extinguish or invalidate the underlying claim, the insurer has nothing to stand behind.
The exclusions that follow specifically from Italian Civil Code limitations — as distinct from standard insurer carve-outs — group into three categories.
First, any warranty where the buyer failed to give the eight-day written notice of defect to the seller under Article 1495. This is absolute and cannot be remedied after the fact. In our files the most common mistake is a buyer who notifies its own advisers, or internally escalates a concern, without sending a contemporaneous written notice to the seller. That internal note does not satisfy Article 1495.
Second, any claim characterised by an Italian court as a garanzia legale where the one-year limitation has expired before the claim is brought — regardless of whether the W&I policy is still on risk. The risk of this characterisation is highest for claims that go to the core of what was transferred: title to shares, capacity and constitution, and fundamental asset defects.
Third, known risks and matters in the data room. This is not a Civil Code point but it interacts with the Italian framework: Article 1491 of the Italian Civil Code provides that the statutory warranty does not apply to defects that were known to the buyer. Insurers price this out through the underwriting process, but where the boundary between known and unknown sits is contested ground that Italian courts will ultimately determine by reference to the Civil Code, not the policy wording.
Unlike in most common-law jurisdictions, where the SPA is the complete contractual universe and limitation periods are freely negotiable, Italian law treats certain warranty obligations as expressions of public policy norms embedded in the Civil Code. The parties can agree to give the buyer more extensive rights — longer limitation, wider reps — but they cannot agree to give the buyer fewer rights than the Civil Code provides, and crucially they cannot agree to override the procedural conditions (notice, timing) that the Code attaches to those rights. An English-law SPA that excludes statutory warranties entirely is unremarkable. An Italian-law SPA that purports to do the same is partially void.
This means that the W&I underwriting process for an Italian deal must include a Civil Code compatibility review — not just a review of the SPA reps against the insurer's standard exclusions schedule. The underwriter needs to know how Italian law characterises each rep, what notification mechanics are operative under Italian law (separate from the SPA's contractual notice clause), and whether the policy survival period is realistic given the one-year trap.
The deal can still work. W&I insurance is a genuine enabler on Italian acquisitions — particularly where the seller is a founder who wants a clean exit, or a financial seller unwilling to give extended recourse. The Civil Code traps are manageable if addressed before underwriting, not after a claim arises.
The first step is to conduct a warranty classification exercise: each rep in the SPA is mapped against the Italian case law split and assigned to one of three categories — clearly contractual (ten-year bar), clearly statutory (one-year bar risk), or contested. Reps in the third category should be drafted as express contractual obligations, with the Civil Code connection severed as clearly as Italian law allows.
The second step is to build a dual notification protocol into the SPA and the policy. The buyer's notice obligation to the seller under Article 1495 must be tracked separately from the notice obligation to the insurer. Eight days is a short window in any post-acquisition organisation. The protocol should designate a named internal function responsible for Article 1495 notices on day one.
The third step is to discuss survival periods honestly with the insurer. An 18-month policy that covers reps in the contested category without an express acknowledgement of the one-year Italian limitation risk is an insurer position that may not hold in litigation. The better approach is a policy that prices the Italian-law uncertainty correctly and acknowledges it expressly, rather than a policy priced on the assumption that Italian limitation rules are equivalent to English ones.
As the legal theorist Karl Llewellyn observed, the real rules of a transaction are not the rules the parties write but the rules a court will apply when things go wrong. On an Italian W&I deal, the rules a court will apply include ones that were not written by any party.
Italian M&A volumes involving cross-border buyers have risen steadily. Legislative Decree No. 47 of 27 March 2026, which entered into force on 29 April 2026, has restructured Italy's mandatory bid rules and narrowed creeping-acquisition windows for listed targets — adding a further layer of deal-structuring complexity that W&I policies will increasingly need to accommodate as more foreign buyers take listed positions. The Civil Code framework described in this article applies equally to those deals. Getting the Italian-law layer right before the policy incepted remains, in every transaction, the better investment.
Does an Italian-law SPA automatically override the eight-day notice requirement in Article 1495?
No. Article 1495 is a mandatory provision. A contractual clause purporting to extend or waive the eight-day notice of defect to the seller is void under Italian law. The notice obligation survives whatever the SPA says, and missing it extinguishes the underlying warranty claim before the W&I policy is engaged.
Will an Italian court apply the one-year or the ten-year limitation period to SPA business warranties?
It depends on how the claim is characterised. The Milan Court of First Instance has generally applied the ten-year contractual bar to business reps in a share SPA. The Italian Court of Cassation has in several decisions applied the one-year statutory warranty framework where the substance of the complaint was that the shares did not correspond to what was described. The split is unresolved. A warranty classification exercise before signing reduces but does not eliminate the risk.
Can W&I insurance on an Italian deal be structured to cover the Article 1495 risk?
Not directly. No insurer can reimburse a loss arising from a claim that has been extinguished by mandatory Italian law. What the parties can do is reduce the risk of extinguishment: build a dual notification protocol that tracks the Article 1495 deadline independently of the insurer notification clause, train the buyer's post-closing team on the eight-day window, and consider whether a management warranty deed with its own contractual survival period can be structured alongside the W&I policy to provide a separate recovery pathway where the statutory route is compromised.
HREFLANG BLOCK:
Editorial Team — Panato Law Firm Staff
