D&O Insurance for REITs: Management Liability, Securities Claims and Side A

D&O insurance for a REIT protects directors, trustees, officers and sometimes the REIT itself against covered claims that arise from management decisions and securities matters. The coverage is usually described in three parts. Side A covers individuals for loss when the REIT cannot indemnify them, Side B reimburses the REIT for covered indemnification payments, and Side C may cover the entity itself for securities claims. The policy wording decides who is insured, what counts as a claim, which retentions apply and which exclusions limit coverage. Before renewal, compare the policy with the charter, the bylaws, the indemnification agreements, the adviser structure, current disclosures and any merger or change-of-control terms.

What does D&O insurance do for a REIT?

Directors and officers liability is "liability coverage protecting directors or officers of a corporation from liability arising out of the performance of their professional duties on behalf of the corporation," in the words of the NAIC glossary (opens in a new tab). For a REIT, those duties touch governance, securities disclosures, share sales, financing, acquisitions, valuations and fees, along with the regulatory proceedings that can follow any of them.

Side A, Side B and Side C are common policy structures, not definitions set by a statute. Policies can be filed as "Directors, Officers and Company Liability Insurance Programs," and a New York Department of Financial Services opinion (opens in a new tab) addresses defense obligations under that kind of policy. Each side answers a different question about who bears the loss.

The three sides can share one limit, and the definitions behind each one vary from policy to policy. The questions worth asking start there: whether entity coverage can reduce what remains for individuals, and how the policy defines a securities claim.

REIT status itself does not shape the coverage. It is a federal tax classification under 26 U.S.C. § 856 (opens in a new tab) and the sections that follow it, while a D&O policy responds according to its insured definitions, claim provisions and exclusions.

Who does the policy need to protect?

The list of people involved in running a REIT is often longer than the board. It can include trustees, directors, officers, independent directors, the REIT entity, an external adviser, a sponsor, a manager, affiliates and the adviser's own personnel. Whether each one is insured depends on the policy's insured-person and insured-entity definitions.

Public filings show how REITs describe their arrangements. Brookfield REIT has indemnification agreements with its directors, subject to the limits in those agreements and its charter, and it maintains a directors and officers insurance policy, according to its April 2026 post-effective amendment (opens in a new tab). The same filing says its charter addresses indemnification of the adviser and its affiliates under specified conditions. Alternative Capital REIT has indemnification agreements with each of its directors and executive officers and also maintains a D&O policy, according to its 2025 annual report (opens in a new tab). An older example shows the same link written into contracts: New York REIT's indemnification agreements committed the company to use its reasonable best efforts to acquire D&O insurance covering each indemnitee, according to a 2015 Form 8-K exhibit (opens in a new tab).

Each of these statements describes one company. None of them tells you what another REIT's policy covers, so the review always returns to your own documents.

Which securities exposures matter for a REIT?

Securities claims are one of the main exposures a REIT D&O policy addresses. Securities Act Section 11 creates liability for materially misleading registration statements, and it reaches specified offering participants, including issuers, directors, officers, underwriters and experts, with statutory defenses available to participants other than the issuer, according to an SEC advisory committee report (opens in a new tab).

Exchange Act Section 10(b) makes it unlawful to use a manipulative or deceptive device in connection with the purchase or sale of a security in violation of SEC rules. Rule 10b-5 prohibits schemes to defraud, untrue statements or omissions of material fact, and acts that operate as a fraud or deceit in a securities transaction, as the SEC (opens in a new tab) explains, with more on materiality in Staff Legal Bulletin No. 21 (opens in a new tab). These provisions describe exposure; they do not decide whether a policy pays.

Non-traded REITs carry securities exposure too. They sell shares through SEC-registered sales, and the SEC's CF Disclosure Guidance Topic No. 6 (opens in a new tab) focuses on their valuation estimates, fee disclosures, adviser compensation, reimbursements and conflicts. Non-traded REITs generally charge sales commissions and upfront offering fees of roughly 9% to 10%, according to the SEC investor bulletin on REITs (opens in a new tab), a figure about the offering, not the insurance.

SEC enforcement outside the REIT world shows the kinds of issues regulators pursue around advisers. Litigation releases have described inflated private fund valuations (Release No. 25532, 2022 (opens in a new tab)), undisclosed compensation conflicts at an investment adviser (Release No. 25340, 2022 (opens in a new tab)) and adviser fee and share-class practices (Release No. 25501, 2022 (opens in a new tab)). None of these cases involved a REIT, and none of them settles an insurance question. They show why investigation and subpoena coverage belongs on the renewal list.

How do external and internal management change the review?

Non-traded REITs are typically externally managed and do not have their own employees, according to the SEC investor bulletin (opens in a new tab). The external manager may earn fees and may manage other companies. BREIT, for example, and its operating partnership are externally managed by BX REIT Advisors L.L.C., according to a July 2026 filing (opens in a new tab).

In that structure, the people making decisions for the REIT may be employed by the adviser. An internally managed REIT generally employs its own management team. The insurance question is the same either way: is each officer, trustee, director, adviser entity, adviser employee, sponsor, affiliate and dual-role individual an insured under the policy? A filing that says an adviser manages the REIT does not establish that the adviser or its staff are covered. Confirm it against the insured definitions and against the advisory agreement.

How does D&O insurance work with indemnification?

Indemnification and insurance are separate protections, and they overlap. Indemnification is the REIT's promise to pay a director's or officer's costs; insurance is a policy that may reimburse the REIT or pay the individual directly.

Indemnification rules come from the corporate law of the state where the REIT is formed. For a REIT formed in Maryland, for example, Md. Code, Corps. & Ass'ns § 2-418 (opens in a new tab) frames the discussion. Under that section:

• A corporation may indemnify a director who succeeds on the merits or otherwise in defending a proceeding.
• Indemnification may extend to expenses, judgments, penalties, fines and settlements, subject to statutory standards and limits.
• Reasonable expenses may be advanced before final disposition when the director gives a written affirmation of a good-faith belief that the required standard of conduct was met and a written undertaking to repay if indemnification turns out to be unavailable.
• Unless the charter limits it, an officer is indemnified as and to the extent provided for a director, and the corporation may indemnify and advance expenses to officers, employees and agents as the charter, bylaws, board action or contract allow.
• The corporation may buy and keep insurance for directors, officers, employees, agents and certain people serving other enterprises at its request, "whether or not the corporation would have the power to indemnify" them under the section.
• Indemnification and advancement rights under the section do not exclude other rights from the charter, bylaws, resolutions or agreements.

A separate provision, Md. Code, Corps. & Ass'ns § 2-405.2 (opens in a new tab), addresses charter provisions that limit director liability. Maryland permits insurance; it does not set the terms of a D&O policy.

Indemnification has limits, and that is where Side A matters. When the REIT cannot or will not indemnify, the individual looks to the policy. Fraud is the clearest example: the statute limits indemnification in certain circumstances, and policies commonly exclude fraud or personal profit after a final adjudication. Ask how the policy treats allegations, settlements, final adjudications and innocent insureds, and whether the charter, bylaws, indemnification agreements and policy line up with each other.

What should be checked at renewal?

Claims-made timing sits at the center of a D&O renewal. A claims-made policy responds when a claim is reported during the policy period or an applicable extended reporting period, as the NAIC (opens in a new tab) explains the concept. The dates in the policy matter as much as the coverage grants.

At renewal, the review covers:

• When a claim is considered made, and the deadline for reporting it.
• The retroactive or continuity date, and whether prior acts are covered.
• Whether known circumstances, pending litigation or matters reported under another policy are excluded.
• How the policy defines a claim, and whether it reaches SEC investigations, subpoenas, interviews and administrative proceedings.
• How securities claims are defined for entity coverage, and which retention applies to entity and individual claims.
• Whether defense costs sit inside or outside the limit, and whether limits are shared among individuals and the entity.
• Notice and reporting obligations.

Exclusions need the same attention. Recurring D&O exclusions include insured-versus-insured claims, prior and pending litigation, fraud, dishonesty or personal profit (often tied to final-adjudication wording), bodily injury and property damage, amounts uninsurable under applicable law, and known circumstances. Conduct exclusions can apply differently to innocent insureds, and the severability and allocation wording decides how. D&O policy filings may contain detailed defense and settlement provisions, and policy form requirements apply, according to the New York Department of Financial Services (opens in a new tab); a 1997 circular letter (opens in a new tab) discusses D&O indemnification insurance.

How do excess layers and Side A DIC fit in?

Excess D&O layers sit above an underlying policy and generally respond only after the underlying limits or the attachment point are exhausted, on the excess policy's own terms.

Side A difference-in-conditions (DIC) coverage gives individuals separate protection. It may respond on different terms from the underlying program when the company cannot indemnify, when an underlying insurer does not respond, or when other specified conditions apply. Its triggers, priority, drop-down provisions, exclusions and limit sharing are specific to each policy. Insurers write this coverage as a distinct line: RLI Corp. describes a public company D&O appetite that focuses on excess Side A coverage where corporations cannot indemnify individual directors and officers, as well as excess full-coverage D&O, according to its 2025 Form 10-K (opens in a new tab). That is one insurer's business description.

What happens after a merger, sale or take-private?

A merger does not automatically preserve the old policy. Transaction documents decide what happens, and REIT merger agreements commonly require a prepaid extended reporting period, often called a tail or runoff policy, or continued comparable insurance.

These are terms from specific transactions, not universal requirements. Another merger exhibit addresses tail coverage alongside separate Side A coverage, severability and non-imputation protections (SEC filing (opens in a new tab)). Before closing, read the merger agreement's insurance covenant and get written confirmation of the tail or runoff protection. Ask whether the tail covers only conduct before closing, whether defense costs and retentions stay on the same terms, and how a change in control affects the policy period and reporting rights. The same questions apply to a sale, a take-private and an internalization of management.

Can a REIT place D&O in the surplus lines market?

Yes, when the applicable state's surplus lines requirements are met. Surplus lines insurers are nonadmitted specialized insurers that cover risks not available in the admitted market, according to the NAIC (opens in a new tab). Several rules follow from that status:

• The transaction is regulated through a licensed surplus lines broker, who is responsible for the eligibility requirements and for remitting surplus lines premium tax to the home state.
• Surplus lines insurers are regulated under state law and the NAIC Nonadmitted Insurance Model Act.
• Admitted insurers are licensed by the state and generally take part in its regulatory and guaranty fund system; surplus lines insurers generally do not participate in state guaranty funds.

The NAIC's model notice (opens in a new tab) tells buyers that a nonadmitted insurer is not licensed in the state and is not subject to the same financial solvency regulation and enforcement as licensed insurers. Confirm whether the insurer is admitted or nonadmitted, that the broker holds the right license, and that the insurer is eligible. Your state insurance department (opens in a new tab) is the place to check.

What should the board, general counsel and broker review together?

The review works best with the documents on the table. Gather:

• The current D&O policy, endorsements and declarations page.
• The renewal application and any claims or circumstances notices.
• The charter, bylaws and indemnification agreements.
• The adviser or management agreement and any sponsor or affiliate agreements.
• The current registration statement, Form 10-K, proxy and relevant SEC correspondence.
• Any merger, sale, take-private or internalization agreement.
• The prior policy and continuity information.
• The insurer's admitted or surplus lines status, and the broker's license and surplus lines documents where they apply.
• A list of directors, officers, trustees, adviser personnel and other proposed insureds.

Then ask: Who are the insured persons and entities, and are adviser personnel, sponsors, managers and affiliates among them? What protection applies when the REIT cannot indemnify an individual, and how are indemnification payments reimbursed? Does entity securities coverage apply, and with what retention? Do the charter, bylaws and indemnification agreements match the policy, and does the formation-state statute permit the indemnification and advancement they promise? What exclusions apply to fraud, personal profit, bodily injury, property damage and insured-versus-insured claims?

The answers give the board a clear view of who is protected and where the gaps sit, and they give the broker what it needs to work on the renewal.

Frequently asked questions

Does D&O insurance cover every SEC investigation?

Not necessarily. Coverage depends on whether the matter meets the policy's definition of a claim or an investigation, and on whether an exclusion applies. Ask how the policy treats subpoenas, interviews and administrative proceedings.

Are external advisers automatically insured?

No. The policy's insured-person and insured-entity definitions decide that. A filing saying an adviser manages the REIT does not by itself make the adviser or its staff insureds.

What is a D&O tail policy?

It is an extended reporting or runoff arrangement for claims about acts or events before a merger, sale or other end of the original policy. The merger agreement often sets its length and terms.

Does state corporate law require D&O insurance?

The corporate law of the state where the REIT is formed governs indemnification and insurance. In Maryland, for example, the law permits a corporation to buy and keep insurance for directors, officers, employees and agents, but it does not require a D&O policy or set its terms. For a REIT formed elsewhere, ask counsel what that state's corporate law allows.

Where to go next

Take the policy, the indemnification documents and the adviser agreement to an agency or broker that handles management liability in your state. Riskado's directory lists insurance agencies across the US, state by state, so you can find one to speak with.