B eing a trustee or committee member of a charity means you are a vital part of a team, ensuring that your charity is run in the best interests of the people or causes you are there to support. It also means you need to protect the physical assets of the charity, such as buildings and land. Trustee Liability insurance is designed to cover the personal assets of trustees and committee members of charities, clubs and associations who are exposed by the decisions they make in their capacity as trustees, regardless of whether they are volunteers or paid employees. Adviser spoke to Shirley Greer, Charity Insurance specialist at Scrutton Bland about some of the common questions charities have regarding insurance: Can you explain the basic way that Trustee Liability insurance works? Trustee Liability cover means that most organisations are permitted to indemnify (or protect) their trustees if they have acted in good faith and in accordance with their duties. The indemnity can cover proceedings brought by third parties (people or organisations bringing a legal case against trustees). In charitable companies, for example, under company law this indemnity will cover both legal costs and the financial costs of any adverse judgment. Can you give examples of where the insurance might be necessary, and the consequences of not having it? Anyone who is a trustee or on a charity committee needs to have Trustee Liability cover, as they may be liable for any claim bought against their organisation for a decision they have made in the course of their duty. So for example, if the trustees of a building owned by a charity employed a builder to make repairs, anticipating they would get a grant to cover the cost, but the grant is then not received, and the builder then sues the trustees for the cost of the work, a Trustee Liability policy would cover the cost of that claim. Without that cover the trustees would have to pay the builder themselves from their own pockets. Trustee Liability protects a trustee’s ‘personal assets’. What does that mean? Personal assets are anything of value which could be converted into cash. This could include savings, land, property and items of value such as cars and jewellery. Trustees could stand to lose any/all of their personal assets, depending on the detail of the claim.
Does Trustee Liability only cover decisions/ actions made by the entire committee, or would it cover an instance where one trustee made a decision on behalf of everyone? This will depend on the claim. Trustees volunteer for the good of the community and should not be penalised for decisions made on behalf of the organisation in good faith. If a rogue member made decisions without the approval of other trustees they would be pursued separately, and the other board members could also sue that person for making a wrongful decision. Say you are a trustee of your local football team. How do you think the Trustee Liability cover benefits you and the other trustees? I volunteer to help at my local football club, but I would only continue as a committee member knowing that should the worst happen, any personal assets I own are covered should a claim be brought against the committee or myself. Charities can be classified as incorporated or unincorporated organisations. What are the advantages/disadvantages? An incorporated organisation works like a company, and its members and trustees are usually personally protected from the financial and contractual liabilities incurred by the organisation. However they still require Trustees Indemnity cover to protect their personal liability as they can be pursued by outside organisations for unintentional errors. An unincorporated charitable association is a quick and easy way for a group of volunteers to run a charitable concern for a common purpose. An unincorporated association cannot enter into contracts or own property in its own right. Debts and obligations are the responsibility of the trustees and members – although in many cases these are smaller associations who don’t employ staff or run premises. Unincorporated organisation are more at risk as they have the added exposure of not being a limited company which means they are personally liable for individual decisions made which may cause financial loss, damage or harm. Scrutton Bland’s Charity insurance team have over 10 years’ experience in working closely with charities and not for profit organisations to understand the specific risks they face and ensuring that they have the right protections in place. The Charity team can be contacted at charityinsurance@scruttonbland.co.uk or by calling 0330 058 6559 .
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