Trustees Liability

In the past trustees have been worried that they may be personally liable for mistakes they make which put charitable assets at risk.

The Charities Act 2006 (which is still being implemented in phases) introduces two small but important changes.

Indemnity Insurance

If trustees act prudently, lawfully and in accordance with their governing document, then any liability trustees incur may be met by the charity’s resources.

Charities can take out insuracne to cover such circumstances.

Any breach of trust will result in the trustee being personally responsible fpr making good any loss to the charity.  Since trustees are acting  as a collective governing body, they will usually be jointly and severally responsible.

Personal Liability Insurance

Risk is when an outcome’s probability is known. Uncertainty is when an outcome’s probability is unknown.Trustees are now able to procure trustee indemnity insurance using the charity’s funds, to protect them from personal liability to third parties.  This is still deemed to be a trustee benefit but it is no longer a requirement to gain permission from the Charity Commission provided that the governing document does not prohibit it.

Fair use of charitable resources?

Trustees need to consider the nature or the charity’s activities, the degree of risk to which the trustees are exposed, the number of trustees to be covered and the cost to the charity of paying the premiums when deciding whether insurance is a good use of resources.

Of course, there is nothing stopping trustees from arranging and paying for their own policies.

 

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

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