Insurance

hot air balloons

Compulsory cover

Charities that employ staff are required by law to have employers’ liability insurance. The charity must have, and display in the workplace, a certificate of employers’ liability insurance. It covers the charity against any claims by workers for injury or disease. “Worker” is defined as anyone who has a contract or apprenticeship whether that is written, oral or implied. It does not usually cover volunteers, visitors, trustees, or self employed people working for the charity. However, your charity may wish to take out a policy that does specifically cover volunteers as well as paid staff.

The Charity Commission in their guidance also emphasise the following in respect of volunteers:

For insurance purposes, charities are  advised to treat volunteers in the same way as they do their employees and to ensure that they are covered by the usual types of insurance a charity might buy, such as employers’ liability or public liability cover. A charity should ensure that its volunteers are protected from harm as a result of any negligence on its part. Also, both the charity and its volunteers should be covered in the event of a third party being injured through the actions of a volunteer. The charity should check any policy to make sure:

  • That it definitely includes volunteers
  • How the term “volunteer” is defined for the purposes of that policy
  • Whether any upper or lower age limits apply
  • That the policy covers the types of activities that the volunteers will be undertaking

 

If your charity owns or operates vehicles then the charity must comply with the provisions of the Road Traffic Acts: The charity must have insurance against third party injury and property damage.

If the vehicles belong to trustees,  employees,  or volunteers and they are using their own vehicles for the purposes of the charity  then the charity  must make sure that the insurance held by the owners of the vehicle covers this use. Any additional premiums for this use could be covered by the charity.

Please be aware that there are special requirements in respect of minibuses used to transport people on a hire basis and the charity should seek advise from their insurers if this applies to their charity.

 

It is a little known fact that special insurance cover is must be included in a safety certificate for equipment such as lifts and hoists, dumb waiters and also fork-lift trucks.

Buildings and Land  cover

This covers the fabric and structures of any buildings or land  that the charity owns or occupies. If your charity rents premises, then your charity needs to check the terms of the lease to ascertain whether it is the responsibility of your charity or the landlord to take out buildings insurance. If your landlord is responsible for the buildings insurance cover then your charity should make sure that it is insured against any associated losses that the charity may face as a result of damage to the building. Also, if the charity is responsible for repairs to the building, the trustees may need to consider whether other risks should also be insured against.

If your charity owns land or buildings please read carefully  the guidance provided by the Charity Commission in CC49. The link to this follows at the end of the insurance section.

Contents cover

The trustees need to consider the following:

  • Whether the cover should be on a “new for old basis”
  • Whether the cover includes loss arising from theft
  • Whether the cover needs to include accidental damage
  • Whether specific items need to be covered such as computers
  • Whether insurance is needed for money in transit
  • Whether insurance is needed for money on the premises

Public liability cover

This covers injury, loss or damage caused to anyone as a result of your charity’s negligence or breach of legal duty and covers people using your charity’s premises or services. When taking out public liability insurance the trustees need to make sure that the policy covers: trustees; employees; volunteers;  visitors to the charity’s premises. The normal limit of public liability insurance is one million. In the event of a claim exceeding the maximum amount payable under the policy the trustees might find themselves personally liable for the shortfall. This would be the case if adequate cover was available, but the trustees unreasonably failed to purchase it, having regard to the nature of the risk and the cost of the cover. It is imperative that the trustees fully disclose the full range and nature of the charity’s activities and fundraising activities  to the insurer. Here is a cautionary and true tale: any fundraising event involving aviation exposure from hot air ballooning, aircraft, or events held at an airport are not covered by public liability insurance. The same applies to watercraft and marine activities. In these case specialist insurance would need to be purchased.

Other possibilities that may require cover

Personal Accident: this can provide compensation to trustees, employees and volunteers who have an accident during the course of their activities on behalf of the charity.

Trustee indemnity: The best protection for trustees is incorporation because this results in limited liability for the trustees. But limited liability does not protect trustees from any breach of trust such as being in breach of the Health and Safety at Work Act, nor does limited liability protect trustees from various statutory liabilities including some criminal offences. Thus, trustees may also wish to consider indemnity insurance. A registered charity cannot purchase this type of insurance unless its governing document allows it to do so. There needs to be  a balance here between peace of mind for the trustees and the reality of what is actually insured against! Trustee Indemnity Insurance does not cover the cost of fines. It does not cover liabilities to third parties. In reality, this type of insurance protects trustees where honest mistakes in managing the charity have resulted in a liability being incurred.

Professional indemnity: if your charity provided formal advice giving this insurance covers the cost of wrongful advice and can be extended to cover slander and libel actions.

Legal expenses: this would cover legal costs and expenses for such matters as defence of employment disputes, defence of prosecutions, defence in civil proceedings such as Inland Revenue investigations.

Terrorism and political violence: this is no longer covered in standard insurance policies.

Risk assessment

There are  a number of ways to manage risk, one of which is to buy insurance cover. The Charity Commission in its guidance identifies the following questions to ask in deciding whether insurance is the most appropriate way to manage potential risks:

  • Which of our areas of activity present a real or significant risk of a particular form of loss or liability occurring?
  • How much would it cost to take out insurance to cover that risk? Have we shopped around or asked our broker for competitive quotes?
  • Can we take any other measures to manage the risk, for example increasing security measures or improving internal financial controls?
  • Would it be better for our charity to pass the risk to a third party (apart from an insurer), for example, the movement of cash from the premises to the bank might be contracted out to a professional cash handling company?
  • If we decide not to insure against a risk, would our charity be able to continue its work or remain viable if it incurred losses from that risk?
  • If we are an unincorporated charity, have we considered the risk of personal liability? As trustees we may find ourselves with a personal liability through no fault of our own if our charity’s assets are not sufficient to cover any liability it incurs.
  • Should we reduce or stop the activity which gives rise to risk?

Checklist

  1. Appoint someone with special responsibility for all insurance matters
  2. Check insurance responsibilities in your lease
  3. Review the amount that you are buying for each type of insurance annually
  4. Always read the small print
  5. Keep a copy of policies off site in case the worst happens!
  6. Keep your inventory of furniture and equipment up to date
  7. Keep up to date with payments
  8. Make sure that all information given to insurance provider is up to date and accurate
  9. You really should be going for “ new for old”
  10. Never admit liability to a third party
  11. Report claims without delay
  12. Have  a procedure for reporting and recording accidents
  13. Display disclaimer notices in communal areas to limit liability in the event of a claim”

Charities operating internationally

These charities will be exposed to more complex risks including medical, accident, critical illness, and travel cover. A charity based in England is not required to buy employers’ liability insurance to cover employees based abroad. However, the charity needs to check requirements in the country in which the employees will be based. Also, charity employees can be insured against risks such as kidnap and ransom. Be aware that the paying of ransoms may be an offence in the country concerned.

Download the Charity Commission guidance at

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/385166/CC49_LowInk.pdf