REIT Insurance Experts Outline Changes to NAREIT D&O Insurance Program

Melissa Lishner, a director at Crystal & Co., and Michael Chu, vice president and national practice leader for REITs at Arch Insurance Group, joined REIT.com for a video interview during REITWise 2015: NAREIT’s Law, Accounting and Finance Conference held in Phoenix.

Crystal is the program administrator for NAREIT’s group Directors and Officers (D&O) Liability insurance program, which is underwritten by Arch.

Lishner outlined the process and rationale for recent changes to the NAREIT D&O insurance program.

Lishner said that following rigorous discussion, significant enhancements and improvements were made to NAREIT’s group D&O coverage that will be available to all current primary insureds and future primary insureds within the program, effective immediately.

Chu, meanwhile, discussed the top three coverage enhancements that have been made.

The exclusion for plaintiffs’ counsel fees in bump up litigation has been removed, he said.

Chu noted that during the past few years there has been an increase in claims frequency surrounding bump up litigation, or litigation that alleges inadequate price consideration and breach of fiduciary duty. “These matters have accompanied merger transactions over 90 percent of the time ,” Chu observed.

A second enhancement states that plaintiffs’ counsel fees paid by a REIT in a derivative lawsuit are covered , Chu said.

Under a third enhancement, all NAREIT members are now offered a waiver of their retention for class certification event study costs in a Securities Claim.

“We feel event study costs are going to be a larger part of the class certification stage in a securities claim and the cost to defend securities class actions is likely to increase. We wanted to provide NAREIT members with some additional assistance,” Chu said.

Lishner suggested that the best way for current and prospective NAREIT members to learn about the new coverage enhancements is to arrange for a meeting with Crystal & Company and Arch.