What is trustee indemnity insurance?
Reputable and committed trustees are vitally important to charities and community groups. However, it is important to recognise that trustees of even very small charities bear considerable responsibility both for their actions and the actions of the organisation they represent.
Making an error on a seemingly minor decision can put them at risk of compensation claims, legal action or official investigations being directed towards them personally.
These claims can be financially crippling to defend, which is why trustee indemnity insurance is so important. It covers the legal costs and expenses of defending against disqualification as a trustee, investigations or extradition proceedings. The most important thing to remember is that without trustee indemnity insurance in place, the trustee themselves may have to pay the costs to defend the claim out of their own personal wealth – which can be financially devastating.
What sort of claims does trustee indemnity insurance cover?
Even when they have the best possible intentions, it is possible for trustees to make errors of judgment that can lead to investigations, enquiries or even legal proceedings.
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 libelous 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.
Arranging trustee indemnity insurance that works for you.
While your charity's activities may seem so straightforward that financial irregularities or breaches of the law are highly unlikely to arise, as the examples above shows, it is possible for trustees to make bad decisions even when their intentions are good.
For comprehensive cover, charities should consider entity cover in addition to trustee indemnity insurance. While trustee indemnity insurance covers individual trustees, entity cover covers the charity itself against a range of scenarios, including investigations, breach of contract or allegations of corporate manslaughter.
Minimising the damage with public relations crisis management
Allegations of mismanagement by trustees can stir interest amongst the press and other media outlets, and few trustees have the necessary experience to handle such difficult situations. As a result, there is the potential for trustees' livelihoods to be put at risk from the negative attention.
That's why Markel include a public relations crisis management service as part of trustee indemnity insurance cover. So as soon as allegations covered by trustee indemnity insurance present a threat to a trustee's livelihood, we will instruct an experience public relations specialist to deal with the media on your behalf, helping to limit the damage to the trustee (and the charity's) reputation.
Trustee indemnity insurance exists to give protection and peace of mind to the directors and officers of all sorts of charities and other organisations, and should always be considered as part of your charity insurance policy. We offer trustee indemnity insurance from as little as £6 a month – get a quote now or call us on 0800 640 6604 to speak to one of our charity insurance experts.
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