Protection coupled with a growth driver
Commercial real estate firms can benefit from a Directors & Officers liability policy, or D&O insurance. Like any company that forms a board of directors, the firm needs to carry D&O insurance to attract and retain top talent, as its directors face significant legal threats — including lawsuits from competitors, tenants, employees, lenders, regulators, and others. For the firm itself, there’s the potentially high cost of these legal claims. For its directors and officers, there’s the risk that they may be held personally responsible if the firm is not financially able or legally permitted to indemnify them or make them whole.
In addition to the need to maintain D&O insurance to attract and retain top talent, these risks inevitably take executives away from their primary responsibility of running the business. Maintaining D&O insurance can relieve some of this cause for distraction as well as provide balance sheet protection for the organization.
A strong D&O program can also aid in debt restructuring and increase the firm’s ability to raise more capital as large investors and sovereign funds factor this in when investing.
Why commercial real estate companies need D&O insurance
A commercial real estate company can be structured in different forms, including Real Estate Investment Trusts (REITS), Partnerships, Limited Liability Companies (LLCs), Corporations (private or public), or some combination of these. These various structures can present unique D&O risks as suits can come from numerous sources.
Events that may trigger a real estate firm’s D&O policy include:
- Employment-related matters: including wrongful termination, failure to hire, workplace discrimination or harassment, hostile work environment, and gender pay gaps
- Misrepresentation of investment information, including company assets or income
- Lawsuits from limited partners or other investors claiming mismanagement of investments
- Mismanagement or misrepresentation of cyber-related exposures
- Alleged breaches of fiduciary duty in the context of financial losses or insolvency
- Breaches of laws, regulations, or rules which apply to the business
- Mergers & Acquisitions (M&A) claims, tender offers, and roll-ups of minority interests
- Joint Venture / Limited partner litigation, especially when JVs unwind
- Initial Public Offering (IPO) exposures if a REIT goes public either through a traditional IPO or via a De-SPAC transaction
- Tenants, building owners, and creditors can all bring various types of suits against Real Estate Directors & Officers