One effective way of managing risk is to have appropriate insurance cover. Having the right type and level of insurance cover to provide protection against financial and reputational risk is vital for charities but needs to be tailored to each charity’s needs. The following points outline some of the key areas of legal liability cover that will be of relevance to many trustee boards.
1. Public Liability Insurance
This covers legal liability for accidental bodily injury to persons other than employees, or damage to their property. Although this sounds relatively straight-forward, issues relating to public liability can be complex. The following specific areas are worthy of some comment:
1.1 Working with vulnerable people
Charities working with vulnerable people could find themselves defending a claim for abuse by an employee brought by someone who is in the care of the charity.
The public liability cover would normally respond where there is the possibility of legal liability for an abuse related injury (physical or emotional) to a vulnerable person. However, it should be noted that not all insurers will provide cover or there may be specific exclusions or limitations in cover.
Where cover is available the insurer will want to establish that there is a culture of good risk management within the organisation and that its policies and procedures are embedded into a written safeguarding policy.
1.2 Contractual obligations
If a charity is involved in delivering contracts, such as government, HSE and local authority contracts, it may be contractually obliged to have certain insurance covers in place. This will vary contract by contract, but most commonly with charities delivering such contracts there is a requirement to have public liability cover for a limit of indemnity of at least €6.5 million or possibly €10 million for some contracts.
1.3 Charity events
In certain circumstances, a charity could be found legally liable for an injury to or death of a participant or spectator, depending on the type of event and degree of involvement that the charity has. The Institute of Fundraising in the UK defines three different types of fundraising event:
In-house events completely organised by the beneficiary charity’s employees and/or authorised volunteers: as the organising body, liability rests with the charity for any accidental bodily injury to a member of the public either participating or spectating.
Sub-contracted events where a charity promotes an event but is not actively involved in its organisation: when using a third party, it is the responsibility of the charity to check that they have the necessary competence and have public and employers’ liability cover. In the event of an accident and where the contractor does not have cover, the charity could find itself held legally liable for the acts of the contractor on the basis that the charity has failed in its duty of care.
Third-party events: for a liability claim to succeed, negligence has to be proved and to prove negligence, there needs to be a failure in the duty of care. If a charity is unaware that an activity is taking place in its name, it is unlikely that duty of care could apply.
If a charity is asked to endorse a venture by volunteer fundraisers, the Institute of Fundraising recommends that the charity should consider providing a checklist of issues to consider. In its guidance literature it provides an example advisory letter to fundraisers which includes the need for insurance.
2. Employers’ Liability Insurance
Employers’ liability insurance covers the legal liability of an employer for injury caused to an employee whilst acting in the course of their employment.
2.1 Employees and volunteers
Within the charity insurance context, some insurers treat volunteers as employees for the purpose of insurance. Charities with paid employees and volunteer workers should be aware that:
Under Health & Safety (H&S) regulations, the law makes no distinction between paid or authorised voluntary workers.
Volunteers working for a charity have responsibilities to comply with good working practices and should work within any parameters set out by the charity to meet H&S requirements. It is the charity’s responsibility to take reasonable steps to ensure that volunteers understand these requirements.
As an employer, a charity has a legal duty of care to ensure the safety of anyone working for them and for anyone affected by those workers’ activities.
2.2 Staff and volunteers working with potentially violent service users and lone working
Charities have a statutory duty of care to provide a safe working environment for both paid staff and volunteers and to have proper risk management procedures in place. Failure in that duty of care could result in the charity being held legally liable if injury arises.
Risks should be identified from a risk assessment and controlled. The factors to be considered as part of the risk assessment include:
the risk of violence and ways of reducing risk (e.g. if service user(s) is potentially violent there is more than one person on duty at any one time and there are easily accessible panic button alarms);
any increased risks to women and young persons;
pre-existing medical conditions which might place a lone worker at risk; and
workplace hazards, such as the use and handling of work equipment which normally requires more than one person to operate safely.
Suitable control measures for lone workers might include:
supervisors periodically visiting and observing lone workers;
regular contact with the lone worker by telephone or radio;
the provision of automatic warning devices; and
checks that the lone worker has safely reached their final destination.
Charities sending workers (paid or volunteers) to dangerous areas of the world (e.g. war zones, aftermath of major earthquake/tsunami) should take specialist insurance advice and ensure practical procedures are in place to mitigate risks. The Charity Commission for England and Wales offers guidance on this and recommends a few basic steps:
Arranging for basic security training for all staff and volunteers employed to work in an unstable environment – this is available from a number of training suppliers.
Having a security policy in place. Staff and volunteers should receive a written assessment of security and health risks, emergency evacuation procedures and insurance arrangements.[ref]Charity Commission: ‘Charities working internationally.’[/ref]
3. Professional Risks
If a charity provides any ‘professional’ type services, for example advice or counselling, they could be held legally liable if this is delivered negligently and financial loss or even bodily injury is suffered as a result.
Professional Indemnity Insurance (PII) provides cover in respect of financial losses arising from ‘professional’ services and it may be possible to extend this to include bodily injury. For medical/treatment type activities where there is a greater potential for bodily injury it may be necessary to consider Medical Malpractice Insurance.
Charities need to ensure that any persons providing such services on their behalf are competent both in terms of experience and professional qualifications.
4. Trustee Indemnity Insurance (TII)
Although not a legal requirement, this particular insurance cover is often considered essential by charities when seeking to recruit high calibre trustees.
Trustee indemnity insurance (TII) protects trustees against having to personally pay when legal claims are made against them for a breach of trust, a breach of duty or negligence, committed by them in their capacity as trustees. The main difference between TII and other types of insurance taken out for the benefit of the charity is that TII directly protects an individual trustee, rather than the charity itself. For that reason, TII is regarded as a form of personal benefit.
There is currently no legislation allowing trustees to use charity funds to purchase TII insurance, this will change when Section 91 of the 2009 Charities Act, which deals with this issue, is enacted. Until then trustees must ensure that their governing document specifically allows them to use charity funds to purchase TII insurance before they buy this cover.
However extensive the insurance cover purchased, it is not an alternative to good risk management. Having a structured approach to risk management enables charities to protect their people and property from harm and will also help defend a charity in the event of a claim. With proper risk management processes and the right type and level of insurance cover in place there is no reason why charities shouldn’t be able to carry out their activities safely and knowing that, if something does go wrong, help from insurers will be available.
Written by Martyn Turner
Niche Underwriting Manager, Ecclesiastical Insurance