Trustees play a vital role in providing necessary skills and leadership so that their charities can achieve their goals. Among trustees, there is a common misconception about their liability being automatically covered by their home insurance policies.
Trustees are legally appointed individuals who are responsible for the management and administration of their charity as well as ensuring its objectives are met.
Trustees must act in accordance with the charity’s governing document, exercising caution and diligence in their decision-making processes. These duties carry a high level of responsibility and, subsequently, any negligent act, or error or omission in the operation of the charity can result in them being personally liable.
Many trustees mistakenly believe their personal home insurance policy will provide adequate coverage for trustee duties. However, home insurance policies are designed to protect homeowners from various risks associated with their property and typically cover risks such as fire, theft, and natural disasters. While they offer valuable protection for personal property and the physical structure of the home, they often do not extend to cover liabilities arising from other duties. Public Liability would also not indemnify a trustee in the event of a claim and should not be relied upon.
Trustee duties can involve a unique set of risks and dangers that are distinctly different from the typical risks faced by homeowners, and policies that are not designed to address these specific risks, leave trustees exposed to handling potential legal claims on their own. In the case that a trustee was to make a mistake or act negligently in the management of their charity, without a proper liability cover, they could find that their personal assets are at risk.
Trustees encounter various risks during their tenure, including potential breaches of fiduciary duties, mismanagement of charity assets, conflicts of interest, or failure to fulfil administrative obligations. Each of these risks can potentially lead to legal claims and personal liability. Mistakes happen but trustees can take proactive steps to mitigate them, should they occur, by having their charity obtain the necessary insurance cover.
To adequately protect themselves from the unique risks associated with their role, trustees’ charities should consider obtaining trustee liability insurance to protect them. This specialised insurance provides cover for legal costs and damages in the event of a claim against a trustee.
Claims can come from many angles, including members of the public, other trustees, employees or the wealth of regulators we have in the UK, including the Charity Commission. Potential claim scenarios can arise from:
– Breach of health and safety legislation
– Alleged misuse of charity funds
– Alleged defamation
– Alleged discrimination
– Breach of trust
Providing protection in the event of a claim, ensuring that the trustee’s personal assets are shielded, and offering cover for legal costs are just a few of the benefits this insurance offers. With trustee liability insurance in place, trustees can fulfil their duties with confidence, knowing they have adequate protection in place should the unexpected happen.
When seeking trustee liability insurance, charities should carefully consider various factors. The policy’s limits should align with the size and complexity of the charity, and it is crucial to review policy terms, conditions, and exclusions to ensure comprehensive coverage.
Another important thing to consider is making sure the policy also covers the charity entity. Trustees will usually make decisions as a group and therefore no one individual is held responsible; in this scenario, the claim could be redirected to the charity entity rather than an individual trustee.
Navigating the complexities of insurance cover can be daunting, especially for charities and trustees who may not be well-versed in insurance matters. Seeking professional advice from an insurance broker who offers guidance in selecting appropriate cover can help ease the process. They will ensure that suitable cover is attained and that the charity and any trustees fully understand the risks they and their trustees may face and the protection that is available to them.
For specialist knowledge and advice on Trustee Liability Insurance, contact McClarrons’ Care & Social Welfare Team on 01653 600477 or at care@mcclarroninsurance.com.
