Being the trustee of a charity is much like being the best man at a wedding – it’s a great honour, but no one really wants the responsibility. As noble a calling as it is, a trustee has to accept ultimate responsibility for the charity’s affairs. As a trustee, you and your fellow trustees accept ultimate responsibility for directing the charity’s affairs, ensuring it remains solvent, well run and meets the needs for which it has been established.
Delegating responsibilities is common, however as a trustee you retain ultimate responsibility for any decisions or actions taken, for example, in the investment of assets or raising of funds. This means you are potentially placing your personal assets at risk if an allegation is made where you failed to use reasonable care and skill in executing your duties.
Charities must comply with numerous employment rules and regulations. To help trustees manage these risks, an insurer have launched a new insurance portfolio specifically for charities.
What your charity will have to comply with will vary depending on your activities and size.
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Compliance with relevant company law – for charities that are companies |
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Compliance with employment law – for charities employing staff (this may also include unpaid volunteers) |
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Compliance with legislation concerning racism, sexual and other forms of harassment and discrimination |
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Compliance with legislation protecting vulnerable individuals |
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Here are some examples of insurance for charities
Trustees and individual liability insurance
Examples of cover which can often be provided;-
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Claims brought against trustees, directors, officers, employees and volunteers |
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Legal costs for allegations of breach of Health & Safety legislation including corporate manslaughter |
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Legal costs of representation at an investigation eg The Charities Commission |
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Legal costs for allegations of fraud or dishonesty (until judgement or admission) |
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Legal costs and awards for claims by fellow trustees, employees or volunteers |
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Non-rescindable cover (other than for non-payment of premium) |
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Automatic 72 month discovery period for retired trustees |
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Employment practices liability
Examples of cover which can often be provided;-
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Claims brought against the charity, trustees, directors, officers and any volunteers |
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Third party claims including harassment or discrimination by a volunteer |
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Legal costs of representation at an investigation |
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Professional and legal liability
Examples of cover which can often be provided;-
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Defence costs and awards for claims against the charity including nuisance, misuse of funds, libel and slander |
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Direct financial loss to the charity following dishonest of employees or volunteers |
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Costs of replacement of lost or damaged data or documents |
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Claims examples involving charities and trustees
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A charity trustee had a claim brought against them alleging that statements they had made on behalf of the charity in a published article had defamed another charity |
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A former trustee brought a claim against the current trustees of a UK charity for non payment of a loan of £250,000 that was allegedly made to the charity by the trustee |
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A trustee has an investigation and criminal prosecution made against them alleging that he had used the charity’s funds for his personal benefit – this was based on evidence that he was living a lifestyle which was beyond his declared financial means |
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A trustee had a claim brought against them for failure to implement correct safety procedures following investigation by a Health & Safety Executive. |
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A UK charity had a claim made against it for unfair dismissal following an employee ‘whistle blowing’ over concerns of financial irregularities |
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A volunteer made a racial discrimination claim against a charity after they applied to move to salaried employment and failed |
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A charity and individual trustee both had a claim against them for constructive dismissal by a long standing employee following alleged sexual harassment |
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A charity had a claim made against it alleging that they had not employed a prospective job candidate on the grounds of their sexual orientation |
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A charity had a claim made against it for using an image in a publication without permission |
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A charity had a claim made against it which alleged that they discriminated by not providing financial assistance to minority groups of applicants |
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A UK charity was the victim of a spectacular fraud perpetrated over four years during which the clerk stole more than £300,000 |
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A UK charity was the victim of the theft of a considerable amount of data handling software resulting in significant additional costs in replacing the stolen data |
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These are only illustrative examples of incidents which charities and trustees are exposed to. If you would like to discuss the requirements of your charity insurance then please call us.
