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Charity trustees face a growing personal liability

Phil Duffy, our charity expert, looks at the broker’s role in ensuring that their charity clients consider an often overlooked area of protection; charity trustee insurance.

Serving as an unpaid director or trustee of a charity is, for many, a rewarding and satisfying experience.

While no one should be discouraged from giving their free time to a worthy cause, it’s important charity trustees and directors are made aware by their broker that they share the same level of personal legal responsibility a director of a private or public company faces when it comes to accusations of wrongdoing. And that the charity looks at ways of insuring against those personal liabilities.

  • Can a charity trustee be sued?



    There is a misconception that because charity trustee roles are unpaid then they cannot be sued. Not true. A board of charity trustees are very much on the front line and can be held personally liable if things go wrong; even if the problem relates to the actions of another trustee.

  • What can they be sued for?


    Trustees may be personally liable for losses caused to a charity if:

    - They act unlawfully or outside the charity’s governing document

    - Commit the charity to debts greater than its assets

    - Or commit the charity to taking on a debt knowing that it will not have the means to pay it back.

    Other claims could stem from health and safety breaches, compliance or regulatory problems, or a failure in their duty of care.

  • Does the legal liability stop after a charity has stopped operating?



    Trustees can still be held retrospectively accountable even after a charity has been wound-up. The situation can also be exacerbated if the charity is unincorporated which exposes trustees to additional liabilities.

  • Have your charity clients considered charity trustee insurance?


    There are 165,000 registered charities in England and Wales, and it’s likely that a low percentage of them have charity trustee insurance in place.

    Why? Some charities and trustees will simply be unaware of the liability they face as individuals, while others will take the view that individuals should be responsible for their own actions. It’s important that their brokers are able to educate them when it comes to assessing this liability.

  • What does charity trustee insurance protect against?


    Charity trustee insurance protects trustees against having to personally pay when legal claims are made against them for:

    - A breach of trust

    - A breach of duty

    - Or negligence committed by them in their capacity as trustees.

    The main difference between charity trustee 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 charity itself.

    A policy will pick up the costs of legal fees that a trustee might incur in their defence against any allegation of wrongdoing.

    It will not, however, cover trustees’ liability in respect of; fines imposed in criminal proceedings or penalties arising from regulatory action where a trustee is convicted of:

    - Fraud

    - Dishonesty

    - Wilful or reckless misconduct

    - Or for conduct which the trustee knew, or should have known, was not in the interests of the charity.

Peace of mind for a trustee

Having a charity trustee insurance policy in place will help give peace of mind to individual trustees and directors, and ensure that they can continue to make an important contribution to a charity’s work, free from concerns that they could face personal liabilities.

We have produced a number of tools to help your clients understand trustee indemnity insurance ; why not share our 60 second video on social media? Or embed our trustee infographic on your website?

To find out more about Ecclesiastical’s charity trustee insurance talk to your nearest regional centre.

Ecclesiastical Insurance Group plc (EIG) Reg No 1718196. Ecclesiastical Insurance Office plc (EIO) Reg No 24869. Ecclesiastical Life Ltd (ELL) Reg No 243111. Ecclesiastical Financial Advisory Services Ltd (EFAS) Reg No 2046087. Ecclesiastical Underwriting Management Ltd (EUML) Reg No 2368571. E.I.O. Trustees Ltd Reg No 941199. EdenTree Investment Management Ltd (EIM) Reg No 2519319. All companies are registered in England at Beaufort House, Brunswick Road, Gloucester GL1 1JZ. EIO and ELL are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Firm Reference Number 113848 (EIO) and 110318 (ELL). EFAS and EIM are authorised and regulated by the Financial Conduct Authority. Firm Reference Number 126123 (EFAS) and 527473 (EIM). EUML is an appointed representative of EIO who is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Firm Reference Number 402228.