We’re living through one of the most tumultuous periods in generations, with COVID-19 causing unprecedented levels of disruption and social need. Many charities and not for profit organisations have chosen to adapt their operations to meet these challenges head on, and to provide invaluable services to their communities.
The Trustees, Directors and officers of charities are being asked to make decisions on a daily basis around how their organisations should operate. Where those decisions are found to be deficient, either the entity or the Trustees could be held personally liable for any errors made.
Whether they are in breach of their governing documents, their own personal authority, or even breaching statutory legislation the decision makers can find themselves on the receiving end of a claim for damages if their decisions have caused a loss to someone else.
Where regulators or other supervisory bodies want to conduct investigations then this too can result in expensive administrative processes for which the financial cost would be expected to be covered by the charity.
Whilst many Trustees are confident in their own abilities, it’s worth remembering that the board acts as a body, and individuals can in some instances be held jointly liable for the negligent actions of fellow trustees.
Whilst many Trustees are protected by their charities, many charities don’t have the funds to pay for a legal defence, and there is also the question of whether funds intended to support good causes should be used for such a purpose.
Trustee Indemnity insurance (sometimes called Management Liability, or Directors and Officers Insurance) protects the Trustees and the organisation in the event that a third party brings a claim against the individual Trustees, and/or the organisation, alleging mismanagement on the part of the Trustees or any person to whom they have delegated their authority.
These specialist policies will cover the costs of any legal fees, damages awarded and any costs incurred in conducting a regulatory investigation. Many will also include a range of extensions covering employment claims, civil fines and penalties and retired trustees.
More than anything it provides peace of mind that actions taken with the best of intentions won’t become a very expensive mistake.
Article written by Simon Tresadern, Technical Lead, aQmen Underwriting
http://www.aqmenunderwriting.co.uk/