- What is trustee indemnity insurance?
- Why is trustee indemnity insurance important?
- What are trustee duties and responsibilities?
- Why is charity governance important?
- Who is covered under trustee indemnity insurance?
- Trustee indemnity insurance claims examples
- What cover is available under a trustee indemnity policy?
- How do insurers underwrite our trustee insurance?
- How is fraudulent or criminal trustee conduct dealt with?
- How does a trustee indemnity policy work?
- How do trustee indemnity limits of liability work?
- How much trustee indemnity insurance should we purchase?
- What is an extended reporting period?
- How to compare trustee indemnity insurance quotes?
What is trustee indemnity insurance?
Trustee indemnity insurance offers financial protection to individuals against civil, criminal and regulatory proceedings, which may arise while acting in their capacity on behalf of the organisation.
The insurance will pay legal costs incurred in defending allegations and damages arising from any judgment, award or settlement.
Trustee Indemnity is similar to D&O insurance, however it is specially designed for third sector & charitable organisations. If you act as a trustee for a pension scheme, please visit pension trustee liability insurance.
Why is trustee indemnity insurance important?
Trustees and individuals acting on behalf of your organisation are exposed to numerous obligations and can become the target of legal proceedings.
Any trustee, officer or employee (including volunteer) performing duties on behalf of the organisation that fails to meet their legal obligations can be held personally liable.
The law generally seeks to protect individuals where they have acted in good faith and complied with their duties. However, every organisation should consider trustee indemnity insurance to offer a legal defence against allegations and protect the personal assets of individuals.
Not for Profits
What are trustee duties and responsibilities?
The extent of trustee duties and responsibilities is a broad topic and beyond the scope of this guide. However, The Charity Commission for England and Wales
offers detailed guidance on what you need to know, what you need to do.
Trustees jointly with others can be held responsible for liabilities in the conduct of performing their duties on behalf of the organistion. For example, they can:
> be liable to the organisation (i.e. breach of trust);
> be responsible for any breaches of the criminal law; and
> be liable under civil law for an infringement of another's rights.
The Charity Commission for England and Wales offers detailed guidance on the liabilities of a charity and its trustees
Why is charity governance important?
Good governance embedded within charities supports their compliance with the legal and regulatory framework. It can also enable a culture where everyone works towards fulfilling the charity's vision.
The Charity Governance Code provides an online tool to assist charities and their trustees develop and maintain high standards of governance.
Who is covered under trustee indemnity insurance?
Typically, all trustees, directors and officers of an organisation and its subsidiaries, whether current, future or past, are covered under trustee indemnity insurance. The definition of Insured Person, typically extends to employees and volunteers whilst acting in an employed capacity.
Cover will typically extend to any lawful spouse, estate, heirs, if named as co-defendant, if allegations are made against an insured person who is deceased, insolvent, bankrupt or deemed incompetent.
Trustee indemnity insurance claims examples
Individuals acting on behalf of organisations are exposed to numerous obligations and can be the target of legal proceedings, both individually and jointly.
Breach of law
Employment practice claims (against trustees)
Breach of trust
Breach of regulation
Decisions exceeding authority
Claims made on behalf of the organisation
What cover is available under a trustee indemnity policy?
The majority of insurers will offer trustee indemnity insurance cover on a packaged basis, allowing the customers to select which limits to purchase under each section.
> Trustee Indemnity
Trustees indemnity offers individuals financial protection from civil litigation and regulatory investigations, while acting in their capacity on behalf of the organisation. The insurance will protect against legal costs in defending allegations and damages.
> Organisation Insurance
Organisation insurance offers the organisation financial protection from civil litigation and regulatory investigations. (i.e breach of contract, copyright infringement and corporate manslaughter). Organisation Insurance can only be offered when purchased with Trustee Indemnity.
> Employment Practices Liability
Employment practice liability
, also known as EPL Insurance, offers the organisation and their trustees, directors, officers, employees, protection from claims arising from a range of employment disputes (i.e. wrongful dismissal, harassment and discrimination).
> Crime Insurance
offers the organisation financial protection for the theft of property, money or securities from employee dishonesty or fraud. The standard offering is typically limited to Employee Cover, however some insurers may provide additional cover.
> Professional Indemnity Insurance
Professional indemnity insurance
, otherwise known as PI Insurance, protects against negligent acts, errors or omissions resulting from civil litigation in the provision of advisory, counselling, consultation or other services.
Additional covers available under the one policy can include: kidnap & ransom, cyber insurance and pension trustees liability insurance.
How do insurers underwrite our trustee insurance?
The size of your organisation, measured by turnover, total assets and employee numbers will have a direct impact on how your trustee indemnity insurance premium is calculated.
A key consideration for insurers is your financial stability and operational history. If you maintain a strong revenue and profitability with little debt, you are likely to obtain more favourable terms.
Typically, underwriters will review your latest reported financial statements from Companies House to consider any negative trends and your likelihood of failure.
Trends indicate a strong correlation between increased frequency and severity of trustee indemnity claims when an organisation becomes insolvent or enters into administration. Downstream claims can arise from a variety of sources and attempt to apportion blame.
How is fraudulent or criminal trustee conduct dealt with?
Fraudulent, dishonest or criminal conduct, in addition to gaining an illegal profit, is not insurable.
In most cases, the insurer will defend the individual on the basis they are innocent until proven guilty and will require a final adjudication or admission of guilt from the offending individual.
Innocent trustees will remain fully covered, even if the acts of their colleagues were fraudulent or dishonest.
How does a trustee indemnity policy work?
An organisation may choose to indemnify its trustees in respect of legal proceedings under a written agreement. However, under any agreement there will be circumstances the organisation will be unable (i.e. insolvency) or not permitted (i.e restricted by law) to indemnify its trustees.
Trustee indemnity insurance policies have therefore been designed to provide cover under the different scenarios. Either pay on behalf of the trustee (Side A); or reimburse the organisation after it has indemnified the trustee (Side B). It is worth noting that most policies will not maintain a deductible for Side A, but will maintain a deductible for Side B.
If you would like a better understanding of liability principles, such as duty to defend or indemnification, please visit liability insurance
How do trustee indemnity limits of liability work?
Aggregate basis, means the amount insured under the policy is a maximum for the entire policy period, no matter how many claims are made; or
Any One Claim basis, means the amount insured under the policy applies to each and every claim (or importantly a series of claims arising from any single event).
Trustee indemnity insurance policies will include a change in control provision. If the organisation is merged or acquired, the policy will stay in force for the remainder of the policy period, but only for claims based on wrongful acts before the change goes into effect.
There will often be the option to purchase an extended reporting period and this should be considered because a transaction will increase the potential for future legal disputes.
How much trustee indemnity insurance should we purchase?
The limit of liability you purchase will depend on your perception of the exposure and how much you are prepared to spend to mitigate the risk.
We recommend you consider more than one option to appreciate the cost to increase your limit. It is also worth considering that defence costs on average amount to 65% of the total cost of trustee indemnity claims.
What is an extended reporting period?
An extended reporting period allows claims to be reported to the insurer after the policy has expired. This ensures protection from wrongful acts that may have already been committed but you haven't received any claims made against you.
The policy will typically define the extended reporting periods available, with an offer up to a period of six years. The extended reporting period will not offer a new limit of liability but provide an extension to the policy period.
How to compare trustee indemnity insurance quotes?
Please complete our online application
to compare trustee indemnity insurance cost from the wholesale market.
Increasing competition within the market means cover offered by insurers continues to expand with numerous extensions available. If your organisation is perceived as carrying a low-to-medium hazard, competition remains high.
At get indemnity we continue to see and reduction in premiums available for trustee indemnity insurance.
If your organisation is perceived as carrying a high hazard exposure or you have recent claims activity, your trustee indemnity insurance broker should engage with you early to ensure sufficient planning to obtain a satisfactory renewal.
This guide is for information purposes and based on sources which we believe are reliable, the general risk management and insurance information is not intended to be taken as advice with respect to any individual circumstance and cannot be relied upon as such.