Trustees Indemnity insurance

Trustees Indemnity insurance for charities

Trustees Indemnity Insurance

Look after your people and they'll look after you

Your trustees could be personally liable to make good your charity’s losses. As trustees and board members act collectively, they could be collectively responsible for meeting this liability.

When trustees can be personally liable

Although extremely rare, it’s not impossible, for charity trustees to be held personally liable:

  • to their charity, if they cause a financial loss by acting improperly; 
  • to a third party that has a legal claim against the charity which the charity can’t meet.

Your trustees and charity can be protected by taking out trustees indemnity insurance.

What’s covered under trustees indemnity insurance?

  • Trustees, from having to personally pay legal claims made against them for a breach of trust or duty
  • Protection for your charity against corporate liabilities arising from claims due to a breach of duties by a trustee or senior management
  • Legal and defence costs, awards and settlements

Here are some examples of what can be covered under a Trustees Indemnity policy.

Alleged defamation

Following 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 claimed 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.

What’s not covered under trustees indemnity insurance?

Not surprisingly criminal, dishonest, fraudulent or reckless acts are excluded from the policy cover.

Who is covered by Trustees Indemnity Insurance?

Anyone who is in a position of trust or leadership within the organisation or who has other legal responsibilities, such as a Director or Trustee Director, Shadow Director Officer or Member of the Management Committee.

The team at Unity can help by discussing who in your charity needs protection and ensuring your charity’s policy covers them.
 

Individual Cover and Entity Cover Trustees Indemnity 

These insurance policies are intended to provide protection for Trustees as individuals where they find themselves personally liable. However often third parties bring the claim against the organisation and the Trustee may find that he/she is unable to use the policy because the policy wording expressly excludes claims made in the name of the organisation. 

It is therefore important you make sure both individual Trustees and Entity defence are covered in the policy you take out.

Do Trustees need to buy their own Trustees Indemnity Insurance?

The main difference between Trustees Indemnity Insurance and other types of insurance taken out for the benefit of the charity is that it directly protects an individual trustee , rather than the just charity itself. 

For that reason, it is seen as a form of personal benefit to a trustee and a charity will need a proper legal authority before it can buy it using its own funds. Many charities have this authority in their governing documents, but if not, section.189 of the Charities Act 2011  now provides a general power to buy Trustees Indemnity Insurance using charity funds. The cost must be reasonable and trustees must be sure that the cover is in the best interests of their charity.

'I have really enjoyed working with you, and thank you immensely for all your support during the renewal process, you were very efficient and always helpful and on hand for my questions. I appreciated all the support.'

UWC (United World Colleges) International

Limiting Trustees Liability 

If your charity is not incorporated i.e. it is not a company that is limited by guarantee, it has no legal personality and therefore it is the trustees who will be held personally liable if the charity has insufficient funds to meet its financial obligations. The Trustees Indemnity Insurance policy will help provide some peace of mind. 

If however a charity is incorporated and they are a company limited by guarantee, this provides greater peace of mind for Trustees as it is the company who will be liable for any debts arising.
However as a limited charity company, you should still consider Trustees Indemnity Insurance as the limited guarantee element only applies if the loss incurred causes the organisation to go into administration. It is also worth noting that if the Trustees or Directors acted improperly or fraudulently, whatever their charity status, they can be held personally liable and in this situation Trustee Indemnity Insurance policy would not respond anyway.

Reducing your risks as a trustee 

There are some steps you can take to help reduce your personal liability risk, such as:

  • Familiarising yourself with the governing document
  • Seeking professional advice when needed, when unsure about duties or when required by statute
  • Implementing effective internal management and financial controls
  • Knowing what areas of law might affect the charity’s activities, such as employment, health and safety, and data protection
  • Ensuring that the charity has the resources to meet its requirements under any contract it signs, and understanding the consequences if there is a breach of contract
  • Establishing effective induction procedures for new trustees
     
Call us for charity trustee indemnity insurance

Find out how we can help your charity and trustees or get a quote.

If you're a charity trustee, treasurer, member of the exec committee or run a voluntary group or Community Interest Company call or email our team of insurance professionals. 

Dan

Call me:

0345 040 7731
FAQ

What is covered under a Trustees Indemnity Insurance policy?

Trustees Indemnity Insurance can protect both the charity and also its trustees.  

It provides protection for a charity against corporate liabilities arising from claims due to a breach of duties by a trustee or senior management. It can also cover the personal liability of trustees who, having acted responsibly and honestly, find themselves being held to account for their charity’s losses.

Does a charity group need to take out a Trustees Indemnity policy?

We recommend a charity has trustee insurance in place to protect itself from liabilities resulting from a breach of duties by a trustee or senior management.  It is also a good way to support trustees as individuals, by covering them from personally pay legal claims made against them.

Do charity trustees need to take out their own Trustees Indemnity policy?

In most cases their personal liabilities will be covered under their charity’s Trustees Indemnity policy, so they will not need their own policy.

However we suggest that all trustees should check their charity has a Trustees Indemnity policy and to what extent they are covered as individuals.

Who is covered under a Trustees Indemnity policy?

Usually any person elected, co-opted or appointed to act as a trustee to a charity or members of an Executive Committee would be covered a Trustees Indemnity policy.

Are all actions by a trustee covered under a Trustees Indemnity policy?

No. Criminal actions would not be covered under a Trustees Indemnity policy.  Nor would actions which a trustee knew (or should reasonably have known) could result in a breach of trust. Regardless of whether a breach of trust might occur, reckless acts would also not be covered.