Trustee Indemnity Insurance FAQs
Trustee Indemnity Insurance policies are often full of confusing and tricky terms and it's easy to forget what was explained when you initially went through the policy, here we have some of the most commonly asked questions so that we can save you time and have a source to refer to if in doubt.
Who is included in the term charity trustee?
The term charity trustee is a broad one and its good for you to know and outline exactly who is included from the moment your insurance begins. Trustees are ultimately people who serve on the governing body of a charity, the titles of those people can be confusing but often they go by directors, board members, governors of committee members.
For example, if you are holding an event at your premises and a member of the public slips on a wet floor, they could accuse you of poor building maintenance and subsequently bring a successful claim against you.
What is a trustee ultimately responsible for?
Trustees are board members or members in the trust who holds the ultimate responsibility for the charity is in charge of keeping all affairs in order. Typically their responsibilities have three main areas; The charity remains in a good financial state. Overseeing and deciding how the charitable funds and assets are used and ensuring that they are used sensibly.
The charity is well run and most importantly; complies with the law. It is the trustee’s role to understand the charity market and its obligations to the Charity Commission. Having a sound knowledge of how annual reports are calculated and managing accounts will help any trustee fulfil their role to the highest standard.
As a charity there will be objectives and targets set, a trustee must set these goals realistically and ensure that these objectives are delivered with integrity and punctuality.
Can trustees delegate their responsibilities?
Generally trustees will need some assistance in their role and it is within their power to delegate jobs and certain powers to other agents or employers. However, the trustee will always remain ultimately responsible for the running of the charity.
Can a trustee resign?
Yes - A trustee can resign, this is usually a fairly straight forward process. However, in order for the resignation to go smoothly it is important to check the charity’s governing document carefully, this especially affects unincorporated charities. Often, legal advice will be needed to ensure that the resignation is effective and all of the charities affairs are in order before the trustees departure.
Why should you consider Trustee Indemnity Insurance?
Under the Company and Charities Acts’ a trustee has some protection and possible some more via your charity’s own constitution. However, this might not be enough. A Trustee Indemnity Insurance plan will enable you to be protected against a financial loss should an allegation be made against you and/or your charity for any incidents or wrongdoing that occur whilst holding your position as a trustee.
To summarise; A Trustee Indemnity Insurance gives you a financial safety net should something happen.
What is the difference between Trustee Indemnity Insurance and Directors and Officers Liability Insurance?
Different insurance policies use different kinds of terminology and the terminology has adapted to work around organisations. For example, some organisations will have a Board of Trustees and others a Board of Directors. The CaSE policy wording is broadly drafted to apply to all trustees, governors, directors, officers or council of committee members of the Charity or Social Enterprise.
What are the main liabilities of a Charity or Social Enterprise?
Just like other organisations, Charities and Social Enterprises have the same liabilities as any other organisation, in the sense that the trustees of a charity or directors of a social enterprise have a commitment to safeguard the property of the organisation, not only from direct loss or damage but also from third party liabilities which would otherwise have to be supplied out of the property of the organisation. To prevent this and protect the charity or organisation, trustees or directors should ensure that all appropriate insurances are in place. If trustee’s and directors fail this duty, they may be personally penalised and liable to make good the organisation’s losses.
Can a Charity or Social Enterprise indemnify me as its trustee, officer or director?
Whether you can be indemnified as a trustee, officer or director will depend on whether there is a clause in the constitutions, a charity or social enterprise can idemnify its trustee, officer or director for liabilities incurred because of them discharging their duties.
For example; A director of a company has a right to be indemnified by the company for all payments made in the proper execution of their powers.
In the case of a Trust if there is no indemnity a trustee can apply to the court under the Trustee Act for the court to order the Trust to relieve them from liability if he or she has acted honestly and reasonably.
This would of course depend on the organisation having sufficient assets to meet the liability.
Does cover vary according to the number of Trustees?
No its does not, the coverage and price stays the same no matter the number of trustees, this would apply to directors and officers too.
Do Trustees all need the same level of cover?
Often the risks that are likely to incur for trustees remain the same between them all when assessing the cover it does not make much sense to assess them singly. This would also apply to directors and officers.
Why is it important that an individual has cover after they have ceased to be a trustee, director or officer?
Should an individual choose to step down from their role as a trustee, director, or officer their duties and decisions made prior to their departure continue to be attached to the individual. Meaning that should any incident that subsequently escalated into a claim, the individual who was the trustee, director, officer or their estate may still be help responsible and could result in paying costs and damages from their own funds.
CaSE The Trustees Indemnity Insurance is specifically designed to automatically protect a trustee, director or officer (at no additional cost) for 6 years after death, retirement, voluntary departure or redundancy.
As a trustee would I be personally liable if anything went wrong?
In some cases there is potential that you could be personally liable for a "breach of trust”. Assuming that the trust fun is sufficient to meet the liabilities a trustee can be indemnified out of the trust property, either under the trust deed or under general law.
Seeking professional advice where you feel is applicable and ensuring that you as the trustee has taken all of the logical steps to protect trust assets will protect you from liabilities before they arise.
A point of note is to remember always your role and that you are liable, it can be difficult at times to act fairly and impartially when considering all of the potential beneficiaries. Your connection to the settlor, the beneficiaries and the personal knowledge you have will aid you in doing this. It is undoubtedly a reason the settlor considered you for the role.
As trustee would I be liable for "breaches of trust" by fellow trustees?
No, each trustee is personally liable for their own breaches of trust and not for co-trustees. However, if a trustee has knowledge of a co-trustee committing a breach of trust and does nothing to prevent them from doing so, they too can be held partly responsible.
In some cases breaches of trust can be defended. Depending on the court and case, the court could wholly or partly excuse trustees for their breach of trust if they believe the trustee acted honestly and equitably.
As trustee would I be liable for the losses of the trust?
The majority of trust deeds procure a statement that the trustees will not be liable for the loss suffered by the trust fund except for in the situation where it is caused by the trustees own fraud or discard.
What sort of claims does trustee indemnity insurance cover?
Even in cases where trustees have good intentions there is still room for human error, a misguided judgement can lead to a string or consequences such as legal action or investigation For example, a few years ago a large sports club ran into financial difficulties and approached the trustees of the club's charitable trust for help. This existed to raise money to help young fans to take part in the sport; yet given the seriousness of the sports club's situation, the trustees felt they had no choice but to help it avoid financial ruin and handed over a large quantity of money to the club.
Unfortunately, as funding the parent club was not the purpose of the charity in question, an investigation by the Charity Commission inevitably followed, which focused on the erroneous actions of individual trustees rather than on the charity itself. In a case such as this, without trustee indemnity insurance, the significant costs associated with the investigation would have to be met by the trustees themselves.
It is also worth noting that trustees can be held personally responsible for more than simply financial irregularities. If, for example, the trustee of a community group issued a press statement that contained potentially libellous comments, any legal proceedings arising as a result would almost certainly be directed at the individual trustee rather than the charity, leading to a potentially substantial legal bill for the trustee, whether the allegations had any merit or not.
Do I need trustee indemnity insurance?
Unfortunately for trustees it is not commonly known that trustees can be held personally responsible for any misjudged actions and decisions during their occupation as a trustee, regardless of any good intentions.
However, it is more formally know that the Charity Commission has taken a hard stance on mismanagement of charities in recent years.
We would advise that every trustee to give serious consideration to a trustee indemnity insurance to avoid painfully high legal costs that with the insurance, the trustee would most likely have to fund their defence out of their own wealth.
What kind of claims does trustee indemnity insurance cover against?
Trustee indemnity insurance claims can be wide-ranging, but some examples are given below:
Following the publication of an article, the charity trustees were sued for defamation by another charity with similar objectives. The claimant stated that certain statements made in the article were untrue and gave a false representation of the charity.
Claim for alleged trespass
A neighbouring landowner to the charity claimed that recent construction carried out by the charity infringed on their property. The charity claim their documents showed that the previous owner passed the land over to them, whereas the claimant argued that the land never legally belonged to the previous owner. Trustees were responsible for damages and for restoring the land to its former condition.
Charity commission investigating Trustees
The Charity Commission investigated trustees of a charity alleging non-compliance with charity law. The allegations concerned trustees meetings not being compliant with the minimum attendance number required and failure to notify funders that the charity's activities had changed.
We're not a registered charity - can you insure us?
Yes. Many of our clients are small charities or community organisations that are just starting up or are too small to be a registered charity.
What limit of cover should I choose?
Many clients and industry bodies with regulatory requirements will require you to have a minimum level of cover in order for you to undertake a contract, so it's worth checking this before you arrange cover. If you're unsure, or it's the first time you have arranged cover, give some thought to a worst-case scenario and the likely costs involved in putting your mistake right. We offer a range of limits, so you're sure to find the right cover for your business.
We don't have a regular meeting place - can you insure us?
Yes. We cover hundreds of small charities and community groups that don't have a regular meeting place and instead rotate between different venues, such as members' homes, village halls and community centres.
Who needs Trustee Indemnity Insurance?
This cover is specifically for senior managers, directors and trustees. Even if you are a company ‘Limited by Guarantee’ you may still need TI cover because the limited only applies if the loss incurred causes the organisation to go into administration.
What does it cover?
Trustee Indemnity Insurance has two key elements of cover: It protects Trustees from personal liability arising from maladministration It protects the organisation from legal claims against it due to maladministration by a Trustee senior manager.
What doesn't it cover?
Bodily injury or property damage. There is a common misconception that trustees need TI insurance to protect them from being sued by a member of the public who may have been injured through contact with their organisation. This should not normally be the case as Public Liability cover would provide protection in such an instance.
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