Ranging from property damage to third party liability for professional indemnity or public liability, charities in the United Kingdom are confronted with an ever increasing exposure to a variety of risks. These risks can end in loss, interruption of business and damage or liability for trustees – and for the charity as a whole. Only the correct and appropriate charity insurance can alleviate these risks and liabilities.
Below are a few types of insurance cover that UK based charities should consider:
Compulsory Insurance
Charity trustees have a duty to protect their charity’s assets and resources; depending on the circumstances there are certain types of activity where the purchase of insurance is required by law.
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Motor Insurance – If a charity owns or operates motor vehicles it must comply with all provisions of the Road Traffic Act – including the requirement to take out insurance against third party injury and property damage. If employees, volunteers or trustees use their own personal vehicles on charity business, the charity must also make sure that the vehicle owner’s insurance covers such use because if it doesn’t the charity may need to purchase additional premiums.
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Employers’ Liability Insurance (EL) – A charity that employs staff is considered to be an employer under UK law. All UK employers are required to take out EL with a minimum cover of 5 million pounds for injuries or diseases that their employees may suffer while working. This liability insurance must be purchased from an authorised insurance company and the certificate of insurance must be displayed prominently in the charity’s premises
Common Covers to Include
Even where a charity is not required under UK law to hold insurance, an appropriate insurance plan is advised in order to mitigate risks. As recommended by the Charity Commission, charities should seriously consider including the following covers in their charity insurance policy.
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Public Liability – Charities should consider public liability cover in order to protect themselves from third party legal liability claims. These claims can include bodily injuries and illness, and loss or damage to material property while on the premises of the property. This type of cover is also often appropriate for charities that carry out business activities away from their own premises.
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Trustee Indemnity – Within a charity, trustees are required to follow certain duties laid out by law. To protect trustees from having to personally pay for legal claims against them, that could have arisen from negligence or a breach of trust or duty, charities are advised to purchase trustee indemnity insurance. However, this will not cover costs related to a criminal fine or penalty, or costs from the trustee being convicted of fraud, dishonesty or reckless conduct.
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Buildings – Buildings should be insured for their full reinstatement value if the charity are the freehold owners . This means that the sum insured, or maximum amount payable by the insurer, should be enough to cover site clearing, demolition work, building replacement and professional fees in case anything should happen to the building. To avoid any potential liability trustees should seek advice from a professionally qualified building surveyor to determine the correct sum insured amount.
If the charity is a lessee of the property, the terms of the lease should be reviewed to determine whether it is the charity or the landlord who is responsible for insuring the building. In some cases the charity may also be responsible for repairs depending on the terms.
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Contents – All charities should have a contents policy in place to cover items such as equipment, cash and furniture. With the exception of rare or irreplaceable items, which can often be replaced on an ‘agreed value’ basis, in the event of a claim the charity will usually be compensated on a ‘new for old’ basis and receive compensation at the current market value of the item. Theft cover should also be considered to cover the cost of investigating and recovering stolen items.
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Professional Indemnity – A charity that provides a professional service, such as counselling, or any form of advice or information, may find itself held liable if the service, advice or information was provided negligently. The charity could be held legally liable for loss, injury or damage that was sustained when the service was provided or as a result of following the advice or information.
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Legal Expenses – The high costs of defending a charity in a legal proceeding, such as an employment dispute, can be devastating to an organisation. This cover can help with the costs of certain legal expenses which may arise if the charity has to bring or defend legal proceedings.
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Employee Dishonesty – To prevent loss, damages and other risks arising from fraudulent or dishonest activities of employees it is advised that charities have employee dishonesty insurance cover in place. It is also recommended that this is extended to cover volunteers. However, this cover is no substitute for sound financial and personnel risk management. Claims are usually only successful if the organisation can show that its arrangements were adequate and the employees were properly supervised.
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Additional Covers – Charities should also contemplate cover for events, personal accidents, terrorism and political violence, increased cost of working, staff sickness and others.
Volunteer Considerations
Although not considered employees, volunteers may also expose themselves to risks. Charities have a responsibility to ensure their health and safety as well providing them with the correct training and supervision. Volunteers can file claims against the charity or trustees if they are injured as a result of the charity’s negligence. The charity and its volunteers should also be covered in case a third party is injured due to actions of volunteers. Charities should check their insurance policies for the following whether the insurance policy includes volunteers, such as employers’ liability extending to volunteers and what the policy definition for ‘volunteer’ is.