Blog

10 December 2018, 10:54

Charity Risk - The Perils of Inertia

Guest blogger Neil Franklin ACII, Managing Director UK Charity Insurance stresses the importance of a tailored approach towards charity insurance.

Are we covered for everything we need?

It’s an obvious, but fair, question that charities ask and perhaps if there’s an element of doubt over what you’re covered for there’s a slight gap in the service you’re receiving. It’s certainly a question that prompts several more:

• Do your insurers really understand what you do?
• When were you last challenged to review and update your insurance programme?
• Do you have periodic dialogue that includes support and advice, or do you just receive a renewal invoice each year?

Maybe you’re very busy and time-pressures mean it’s easier to roll your cover over each year assuming all’s well until you hear, or find out, different.

Too frequently, these and other uncertainties are driven by a lack of engagement where insurance is concerned. Proper advice in the context of insurance is just as vital as that which you would expect from your lawyers or accountants. That’s why it’s important for an insurance professional to spend as long as it takes to make absolutely sure they understand what an organisation does and where they might be vulnerable. A true charity insurance expert should take responsibility for driving that discussion with you.

Legal structure, roles and responsibilities

So what should your provider be looking for? This might seem obvious, but it’s crucial to get the basics right around the legal structures and who’s doing what and in whose name. As a legal entity, when you get involved in outreach, events and fundraising, are you doing so as organiser, participant, or collaborator? It’s quite common, but potentially dangerous, for organisations to assume they’re protected by the insurances of other organisations or a venue. That includes any consultants and sub-contractors acting on your behalf too. This is a minefield and you should never make an assumption.

Mission drift or unexpected success

Have you grown and taken more on? We have experience of clients who were suddenly transformed through a single, positive event that raised their profile and brought about significant, lasting change with the ability to seek funding from sources that would previously have been unimaginable. Planning for all the consequences of that only became possible as this emerged in the course of an annual renewal discussion.

The law of unintended consequences

Absurd as it might seem for me to suggest, it’s possible that you don’t know about everything that’s going on out there amongst your supporters. Purely by chance we once became aware of a situation, just prior to meeting an existing charity client, where it emerged during the meeting that they had absolutely no idea the activity was going on despite it very clearly being undertaken in the organisation’s name.

Something else that would be easy to overlook is whether, during the course of your charity’s work, others could claim they relied upon a representation made by you and suffered loss as a result. Even if advice does not form an integral part of what you do, it’s worth considering whether you might be exposed - even through signposting, or a simple desire to help.

Spurious claims still cost charities money and goodwill

In the specific context of legal liability insurances, it’s impossible to underestimate the value of being covered for the defence costs and expenses that can follow any allegation or investigation. Even if a claim is successfully rebutted, the cost of getting to that point can run into tens of thousands. All too often, there are cases where organisations have had to dip into hard-earned resources where they were not insured, but could have been. Insurers also now frequently engage with specialists who provide invaluable help in managing reputational scenarios that can be complex, time-consuming and potentially damaging.

Value for money versus cheapness

Good advice and fit-for-purpose cover needn’t cost the earth, but the consequences of getting it wrong could be game-changing. Whatever you pay, if it’s for the wrong cover or an incomplete service, it could be a waste of money. Paying the right amount for the right service and cover is not. In the end it’s for you to decide whether you’ll put in place certain covers or not, but we would counsel you to do so from a position of strength, through informed choice.

Charities are often complex and diverse by their nature, with inherent (potentially many) exposures to legal liability and other losses that are not always obvious. Making sure that’s matched with appropriate protection requires a considered, thought-through approach from a charity insurance specialist perhaps tailoring a bespoke, rather than off-the-shelf, solution.