What Is Trustee Indemnity Insurance?

Trustee Indemnity Insurance is a policy that protects members of the Management Committee from personal liability claims. The title ‘trustee’ alludes to a member of a charity’s Management Committee, however the insurance is also accessible to non-charitable organizations.

What is trustees indemnity cover?

Trustees indemnity insurance (TII) protects trustees from having to pay legal claims brought against them (by their charity or a third party) for a breach of trust, a breach of duty, or negligence committed while serving as trustees.

The key distinction between TII and other types of insurance purchased for the benefit of a charity is that TII protects an individual trustee rather than the charity as a whole. As a result, TII is considered a sort of personal benefit to a trustee, and a charity must obtain necessary legal permission before purchasing it with its own funds. Many organizations have long had this type of authorization in their bylaws, but if they don’t, s.189 of the Charities Act now gives them broad ability to purchase TII using charitable cash. The expense must be reasonable, and trustees must be certain that TII is in their charity’s best interests.

Trustees are able to purchase TII out of their own pockets if they so desire; no legislative authorisation is required.

This means that the only time a charity needs to contact the Commission for permission to purchase TII is if the organization’s governing document expressly prohibits it, which is extremely rare in our experience. A general restriction on trustees profiting from the charity does not preclude the statutory ability to take out TII.

Trustees of charities can purchase TII to protect themselves from personal responsibility in the following areas:

(a) any violation of trust or duty committed by them in their role as charity trustees or trustees for the charity, or (b) any breach of trust or duty committed by them in their capacity as charity trustees or trustees for the charity, or

(b) any carelessness, default, breach of duty, or breach of trust while serving as directors or officers of the charity (if it is a body corporate) or of any body corporate carrying on any activities on behalf of the charity.

However, the terms of such insurance must be drafted in such a way that any indemnity for a person in respect of:

a monetary quantity payable to a regulatory authority as a penalty for failing to comply with any regulatory requirement (however arising)

(b) any liability incurred by him or her in defending any criminal proceedings in which he or she is convicted of an offence originating from any fraud, dishonesty, or wilful or reckless behaviour; or

(c) any obligation he or she may have to the charity as a result of conduct that he or she knew (or should reasonably be presumed to have known) was not in the charity’s best interests, or for which he or she did not care whether it was in the charity’s best interests or not.

Trustees of a charity who have acted honestly and reasonably are entitled to seek indemnity from the charity’s assets for any obligations they have incurred as trustees. Insurance for such liabilities will benefit the charity rather than the trustees, but it will ensure trustees are covered even if the charity does not have enough assets to satisfy the indemnity.

If the charity is a corporation or conducts part of its business through a separate corporation, the trustees’ personal liability for any unlawful acts as company directors or officers (including wrongful trading) is similarly covered to the degree it does not fall under (c) above.

Do we need trustee indemnity insurance?

Trustees have a basic responsibility to safeguard a charity’s assets. While having insurance in place isn’t a legal necessity, it’s a simple way for a trustee, director, or officer to guarantee they’re completing their job for an organization.

Not only that, but trustee indemnity insurance may help with the aftermath of a claim, such as reputational damage and legal proceedings, relieving a lot of the burden from your trustees who have volunteered so much of their time to help the organization.

What is a trustee for insurance purposes?

A trustee is a person who has been entrusted with the legal obligation of managing a trust’s affairs. In general, this refers to money, physical and intellectual property, and any other valuable assets held in a trust.

The fundamental goal of selecting a trustee is to provide the trustor peace of mind that someone will act on their behalf to carry out their desires if they die or become disabled. The increased obligation of making daily choices is frequently not an issue because the person who owns the assets is often the principal trustee. When they die, though, a successor trustee takes over their responsibilities.

Depending on the sort of trust involved, there are many distinct types of trustees, including estate trustees, bankruptcy trustees, qualified insolvency trustees, and more.

A board of trustees can be formed to work together to carry out the trustor’s desires. In charitable or investment trusts, this is frequently the case.

What indemnity insurance means?

The commitment of one party to compensate another for prospective losses or damages is known as indemnity. The act of compensating another party when a loss occurs is known as indemnification. The indemnitee is protected from liability in an indemnity contract, while the indemnitor holds the indemnitee harmless.

If a physician works for a hospital, for example, he or she may be compelled to sign an indemnification agreement holding the facility blameless. The physician indemnifies the hospital so that any litigation brought as a result of the physician’s activities will not be taken against the hospital. As a result, the physician may need malpractice insurance (a type of indemnity insurance) to protect themselves from future patient lawsuits.

How does indemnity work with auto insurance?

  • Legal fees: If you have liability insurance, your insurer may cover your legal fees if the damaged party files a lawsuit against you.
  • Medical bills: Your liability insurance covers medical expenditures incurred by the other driver and their passengers in an accident, up to the limits of your liability coverage. If you have medical payments coverage, your insurance company will also cover your and your passengers’ medical expenditures.
  • Repairs for property damage: If you cause an accident that results in property damage, your liability insurance will pay an indemnity to the other motorist. If you have collision coverage, you may be eligible for reimbursement for vehicle repairs.

Are trustees liable?

In general, trustees are accountable if their individual acts resulted in a loss or an incident, or if anything may have happened if the trustee had been careless. This personal liability can be covered by trustee indemnity insurance.

Do all charities need insurance?

Any charity that owns or occupies land or buildings, or holds fundraising events, should consider purchasing public liability insurance, according to the government.

This crucial insurance protects your charity from legal claims made by anyone who may be injured or whose personal property is destroyed or damaged as a result of your activities.

Consider a member of the public slipping on a wet floor or damage to a village hall during a fundraising event.

If you’re arranging an event or a fundraiser, keep in mind that some venues may demand a certain level of public liability insurance. Examine what’s needed and what safeguards you already have in place.

Simply Business makes it simple by including public liability insurance in a customized charity insurance package.

What does directors and officers insurance cover?

Directors and officers (D&O) liability insurance protects the personal assets of corporate directors and officers, as well as their spouses, in the event that they are personally sued for actual or alleged wrongful acts in managing a company by employees, vendors, competitors, investors, customers, or other parties.

Is insurance a charity?

Insurance has developed as a means of protecting people’s assets from loss and uncertainty. It can be regarded as a social device that reduces or eliminates the risk of death or property damage. A contractual agreement in which one party undertakes to reimburse another for damages is the emphasis of the legal definition.

Charity is freely provided, but insurance is not available without a fee. Although it is a type of business, it gives protection and safety to an individual and society by guaranteeing the payment of loss in exchange for a premium. It is a profession since it only charges a small fee for providing enough resources in the event of a crisis.

All charities confront risks, and the majority of them can benefit from the protection provided by insurance. The correct charity insurance protects your organization from any potential loss, damage, or liability difficulties. Certain types of insurance are required by law for charity and not-for-profit organizations to cover particular activities. Employers’ liability insurance, for example, is required by law if your organization employs people or uses volunteers. For charities that might be financially damaged if their activities were disrupted, trustees should consider business interruption insurance, as well as professional indemnity insurance for charities that provide counseling and advising.

What is a bank trustee?

A bank trustee is a person who works for a bank. They are in charge of administering, managing, and investing the trustee’s assets. Bank trustees maintain the trust assets in-house and oversee the investments. The benefits of having a bank trustee include consistency, fund protection, and conflict of interest management.

Who appoints a trustee?

The Trust Property Control Function (the Act) makes it clear that a trustee can only act as a trustee if all three requirements are met: he or she has been appointed in terms of the trust deed, accepted trusteeship, and has been appointed by the Master as demonstrated by Letters of Authority.