Trustee indemnity insurance

We’re only human, and even trustees, directors and officers can suffer lapses in judgement from time to time. But unlike a standard employee, a trustee can be held personally responsible for any financial losses that occur from their mismanagement.

This is where charity trustee insurance comes in. Trustee indemnity insurance (or “trustee liability insurance”) financially protects individuals in positions of authority – such as trustees or board members - if a claim is made against them for committing a wrongful act that is damaging to the organisation.

Without this cover, individuals can be held personally liable to the full extent of their wealth or assets – including covering the cost of compensation, Charity Commission investigations and legal proceedings. That’s why, in addition to providing cover for settlement of a wrongful act, trustee indemnity insurance also provides cover for the legal costs of defending the claim.

What is a trustee?

In relation to charities, a trustee is an individual (or board member) given administrative and financial authority over an organisation.

Your board of trustees will be a significant cog in the wheel of your organisation, and bear the responsibility for important decisions on a day to day basis. But this can also make them susceptible to claims of mismanagement - which could potentially result in a third party compensation claim, for which the trustee could be held personally liable.

It’s also important to remember that many trustees will be volunteers, and may not have much PR or administrative experience – so having trustees indemnity in place is a simple way to ensure your trustees are both financially protected and given the support and advice they need to be able to deal with the fallout a reputational crisis.

Trustees, directors, officers, committee members and governors of public organisations can all be held personally responsible for decisions and actions made on behalf of their organisation. They could also be sued or prosecuted for any mistakes and their consequences during the performance of their statutory duties. If you hold one of these roles, you may need trustee indemnity insurance.

Often these policies can be extended to include claims made against the organisation as well as an individual.

One of your trustees writes an article about another charity that works in your sector. In response, the charity sues for alleged defamation, claiming the article contained untrue statements about their organisation’s goals.

Under these circumstances, your trustee indemnity insurance policy would provide cover for any relating legal defence costs, including compensation and any required incidental professional advice to support you in recovering from any resulting reputational impact.

The level of trustee indemnity insurance your charity needs will depend on a number of factors, so it’s useful to have the following information to hand when you get a trustee indemnity insurance quote:

• How many trustees / directors / officers / board members does your organisation have?
• What is the gross annual income?
• What type of organisation is it? e.g. a conservation group versus an education group
• How many volunteers / employees are there?
• Does your organisation undertake any third party contracts?
• Do you operate overseas?
• Who are your service users? e.g. are they children, vulnerable adults

Endsleigh can provide up to £5 million trustee liability insurance.

On a basic level, trustees have a duty to protect a charity’s assets. While it’s not a legal requirement, having insurance in place is an easy way for a trustee, director or officer to ensure they’re fulfilling this duty for an organisation.

Not only that, but trustee indemnity insurance can provide invaluable support in dealing with the aftermath of a claim, including reputational damage and legal proceedings – taking a lot of the pressure off your trustees who have given up so much time to support the organisation.

Yes, Endsleigh’s trustee indemnity insurance provides cover for loss of money or goods arising from the dishonest or fraudulent acts of your trustees, directors or board members.

The covers provided under these policies are essentially the same. The key difference is that directors and officers liability insurance is more commonly provided for businesses, whereas trustee indemnity insurance is provided for charities, community groups and not-for-profit organisations.