Product Highlight – Real Estate Developers E&O

As a real estate developer or a construction or design professional with ownership interests in projects, how do you protect yourself from all of the additional professional exposures that come with the convergence of construction and real estate?  Will a design professional or contractors’ professional liability policy cover you for the various additional exposures that come with developing, owning, maintaining, leasing or selling a property? The best way to avoid coverage gaps is to purchase a Real Estate Developers (RED) Errors & Omissions policy.  These professional liability products are typically written on an annual basis for the entirety of your real estate exposures or can be written on a project specific basis for single projects.

RED policies cover third-party economic damages, bodily injury, property damage, pollution liability, third party discrimination, and personal advertising injury and defense costs and are designed to cover direct and vicarious exposures related to:

  • Design
  • Construction
  • Real Estate Services

Structured to cover nearly all aspects of the insureds’ professional liability exposures, RED policies are designed to fill the “professional liability gap” found in most general liability policies for real estate firms. Benefits include:

  • Expansive definition of professional services including:
    • Traditional real estate development services
    • Preparation, transmittal and awarding of design and construction bid packages.
    • Management, coordination and supervision of design and construction, whether these services are undertaken in-house or
    • Real estate agent, property manager, general contractor, title agent or notary services for both “owned” and “non-owned” property developments
  • Customized services as necessary, by endorsement
  • Real Estate Developer protective coverage to cover losses arising from negligent design
  • For those developers who have in-house construction activities, rectification coverage can be provided.
  • Some RED policies can also be coupled with a Real Estate Investment E&O product for those businesses that prepare, coordinate and solicit capital for real estate
  • Alternatives can be provided for defense costs outside the limit of liability.
  • Fulfill contractual obligations required by owners, lenders, investors, quasi-governmental entities and other third

Examples include:

  • An owner’s developer who purchases land, develops it and retains the property to derive revenues from leasing and property management services
  • Construction firms who have a development arm
  • Low income housing developers
  • ‘Developers for a fee’ who provide professional development services to owners but have no ownership in the properties themselves

This is an emerging market and capacity is typically limited to more than $50 million on a standard basis.  However, markets continue to express an interest in entering this arena to grow market share.

RT Specialty’s National Environmental and Construction Professional Liability Practice can assist in evaluating your insured’s current real estate professional liability program or in developing an optimal solution for your client that may not be available in the standard professional liability marketplace.

For more information on RED E&O, please contact your RT New Day consultant.