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Charity insurance
Contracted services insurance is the cover a charity needs to meet the insurance and indemnity terms in local authority or NHS service contracts. Getting it wrong can leave reserves exposed.
Part of: Charity insurance
In short
Charities delivering council or NHS services usually sign contracts that set minimum limits for employers' liability, public liability and professional indemnity, and include an indemnity clause. Policies generally cover the charity's legal liability, not every promise in a contract, so wide indemnities, mismatched limit bases and missing run-off create gaps. TUPE transfers from public bodies can bring historic employers' liability with them, and processor terms shift data risk. Trustees should check the wording, not just the certificate, before signing, and review the programme whenever contracts change.
A charity that delivers services under a local authority or NHS contract usually takes on insurance obligations that go well beyond what it would choose for itself. The contract will commonly specify minimum limits for employers' liability, public liability and professional indemnity, ask for evidence of cover each year, and include an indemnity clause that makes the charity answerable for losses arising from its delivery of the service.
None of that is unusual. The risk for a board is signing terms the existing programme does not actually meet, or meets only on paper. The Charity Commission's guidance Charities and insurance (CC49) notes that some leases and contracts may require particular insurance and that trustees should consider taking proper independent advice where they lack the expertise. For a charity holding several contracts across different commissioners, the gaps tend to sit in the detail: how a limit applies, whether the policy wording matches the clause, and who carries liabilities that transfer in with staff.
Many public service contracts ask the provider to indemnify the commissioner against claims, losses and costs arising from the provider's performance of the contract. Liability policies generally respond to legal liability the charity would have anyway; a promise to pay more than that, or to cover losses the charity did not cause, may fall outside cover. Our page on how contractual liability is treated explains why, and hold harmless and indemnity agreements covers the wording to watch.
A contract may ask for, say, a stated sum "for any one claim" while the charity's PI policy is written in the aggregate, shared across every claim in the year and every contract the charity holds. Check whether the contract wording and the policy basis match before signing, and see what to do when a contract asks for higher limits.
Contracts often require cover to be maintained for a period after the contract ends. PI and abuse cover are commonly written on a claims-made basis, so the policy in force when the claim arrives responds, not the one in force when the work was done. CC49 notes that because many PI policies are claims-made, trustees may need to budget for premiums over several years.
Where the charity handles service users' records for the commissioner, the contract usually includes processor terms. The Information Commission (formerly the ICO) sets out what a controller to processor contract must include. Liability for a data breach, and any data protection indemnity, should be read against the charity's cyber and PI cover.
When staff transfer from a public body, the Transfer of Undertakings (Protection of Employment) Regulations 2006 move employment liabilities to the new employer. Where the outgoing employer was exempt from compulsory employers' liability insurance, as HSE's brief guide for employers says most public organisations, local authorities and NHS bodies are, regulation 17 makes the transferor and the transferee jointly and severally liable for employers' liability relating to the employee's earlier employment. Tell insurers about any incoming transfer and ask how historic injury or disease claims would be handled.
The table maps the exposures a contracted service typically creates to the policy that commonly responds, subject to the policy terms.
| Exposure under the contract | Cover that usually responds | What to check |
|---|---|---|
| Injury to staff, including TUPE transferees | Employers' liability | Minimum limit in contract; prior employment liabilities |
| Injury or damage to service users, visitors or premises | Public liability | Contract limit, any each and every claim wording, care or treatment exclusions |
| Negligent assessment, care planning, advice or referral | Professional indemnity or medical malpractice | Claims-made basis, limit basis, run-off after contract ends |
| Allegations of abuse by staff or volunteers | Abuse cover, often within PL or PI | Sub-limits, aggregate, retroactive date |
| Service user data breach | Cyber, sometimes PI | Processor indemnity, regulatory investigation costs |
| Commissioner claims against trustees or managers | Trustee indemnity or D&O | Contractual liability exclusions |
| Premises or equipment loss stopping delivery | Property and business interruption | Indemnity period long enough to restart the service |
Illustrative example 1. A charity wins a community support contract that asks for PI "for each and every claim". Its policy is written in the aggregate and already shared with two other contracts. The board asks its broker whether an each and every claim basis is available, or whether the commissioner will accept the aggregate basis, before signing rather than after.
Illustrative example 2. A day service transfers in thirty staff from a council under TUPE. A former employee later brings an industrial disease claim relating to years at the council. Because the council was exempt from compulsory cover, regulation 17 makes both employers jointly and severally liable, and the charity's employers' liability insurer needed to know about the transfer at the outset.
Illustrative example 3. A contract requires the charity to indemnify the trust for "all losses howsoever arising". The charity negotiates the clause down to losses caused by its own negligence, which brings it closer to what its liability policies are designed to cover.
For a charity delivering public contracts, insurers generally ask for:
Clear information usually produces clearer terms. Gaps tend to lead to exclusions, sub-limits or questions late in the tender timetable.
Trustees should review the programme before bidding for a new contract type, on any TUPE transfer, when contract income moves materially, when a contract ends or is retendered, and after any serious incident. Use our contract insurance clause check before signing, and consider a fuller charity insurance programme review or general insurance programme review once a year.
Related reading: trustee indemnity insurance, D&O for charities, business interruption for charities, safeguarding and abuse cover, charity cyber cover and the charity insurance broker guide.
Apex arranges insurance for charities delivering contracted services; a broker reads every enquiry.
Leave a name and number and a broker who works with charities will call you back, usually the same working day. Or ask for a free second opinion on your charity’s insurance.
Or email your schedules and renewal date to info@apexinsurancebrokers.co.uk, or call 0117 325 0027.
Not automatically. The contract may ask for higher limits, a different limit basis, specific cover such as abuse or medical malpractice, or cover maintained for years after it ends. Compare the insurance schedule and wording with the clause before signing, and ask the commissioner about any requirement your programme cannot meet.
Usually only so far as the indemnity matches liability the charity would have anyway in law, subject to the policy terms. Wide indemnities for losses the charity did not cause, or for consequential losses, may fall outside cover. Your broker can check the clause against the policy.
Employment liabilities generally move to the new employer. Where the old employer was a public body exempt from compulsory employers' liability insurance, regulation 17 of the TUPE Regulations makes both employers jointly and severally liable for claims relating to the earlier employment. Tell your insurer before the transfer.
Not always, but many contracts involving service user records include data processing terms and liability for breaches. Cyber cover commonly responds to incident response costs and some third party claims, subject to the policy terms. Check what the contract requires and what your PI policy already includes.
Send us your current schedules, policy wordings and renewal date. We will review the whole programme and give you a one-page summary for your board: what to keep, what is missing and what to change. No fee and no obligation. Or call 0117 325 0027.
Get a second opinion Get a quoteApex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information, not advice on your individual circumstances, and it does not guarantee that cover will be available or on what terms.
