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Insurance explained
Trustee indemnity insurance exclusions are the claims, losses and circumstances a policy protecting charity trustees will not pay for, some required by law and others added by insurers. They matter because most disputes over trustee cover turn on an exclusion or definition rather than the headline limit.
Part of: Commercial insurance
In short
Trustee indemnity policies bought with charity funds must exclude criminal fines, regulatory penalties, criminal defence costs after a conviction for fraud, dishonesty or wilful or reckless misconduct, and liability to the charity for conduct a trustee knew was against its interests, under section 189 of the Charities Act 2011. Insurers commonly add exclusions for prior and pending claims, known circumstances, claims between insured persons, bodily injury and property damage, pollution and professional services. Several of these work alongside the retroactive date, so continuity of cover and full disclosure at each renewal matter.
Trustee indemnity insurance protects individual trustees against personal liability for breach of trust or duty. Its scope is shaped by three things:
Exclusions are usually read narrowly against the insurer if they are ambiguous, but a clear exclusion will normally be applied as written. Reading them before you buy is the practical safeguard.
Section 189 gives charity trustees a power to buy indemnity insurance out of charity funds, provided they decide it is in the charity's best interests. In return, section 189(2) requires the policy to exclude the following. The Commission repeats these in its Charities and insurance guidance (CC49).
| Statutory exclusion | What it means in practice |
|---|---|
| Fines imposed in criminal proceedings | A fine on a trustee personally cannot be insured with charity funds |
| Sums payable to a regulatory authority as a penalty for non-compliance | Regulatory penalties are excluded, although defence costs before that point may still be covered |
| Costs of defending criminal proceedings where convicted of an offence arising from fraud, dishonesty or wilful or reckless misconduct | Costs are commonly advanced during the case and become repayable once the conviction is final |
| Liability to the charity for conduct the trustee knew, or must reasonably be assumed to have known, was not in its interests, or where the trustee did not care | Deliberate or reckless harm to the charity is not covered |
The section also makes clear that the power is not excluded by a general bar on trustees benefiting from charity funds, although it does not authorise insurance that the charity's trusts expressly prohibit.
Wordings differ, but these exclusions appear in many trustee indemnity and charity D&O policies.
| Exclusion | What it usually removes | Why it matters |
|---|---|---|
| Dishonesty and fraud | Claims arising from dishonest, fraudulent or criminal acts, usually once established by a final judgment or admission | Defence costs are often paid until that point; severability protects other trustees |
| Prior and pending litigation | Claims arising from proceedings that began before a set date | Matters already in dispute at inception are not covered |
| Known circumstances | Claims arising from matters a trustee knew about before the policy started | Links directly to fair presentation and notification |
| Insured versus insured | Claims brought by one insured person or the charity against another | Board disputes may fall outside cover; see the insured versus insured exclusion |
| Bodily injury and property damage | Claims for injury or physical damage | These belong under public or employers' liability |
| Pollution | Claims arising from pollution or contamination | Some wordings give back defence costs for individuals |
| Professional services | Claims for negligent advice or services to beneficiaries or clients | This is the role of professional indemnity; compare trustee PI and trustee indemnity |
| Employment claims | Unfair dismissal or discrimination claims, unless an EPL section is added | See employment practices liability |
Theft of charity funds by staff or volunteers is a loss to the charity rather than a claim against trustees, so it usually needs crime or fidelity cover instead.
Most trustee indemnity policies are written on a claims-made basis: the policy in force when the claim is made responds, not the one in force when the act happened. A retroactive date may limit cover to acts after a set date. Our guide to retroactive dates explains the concept in more detail.
The retroactive date, the prior and pending litigation date and the known circumstances exclusion work together:
This is why switching insurers or letting cover lapse can create a gap, and why notifying circumstances before renewal matters. See circumstance notification and claims-made versus occurrence.
These examples are illustrative only and do not describe real charities or claims.
Illustrative example 1: a known complaint. A trustee receives a letter alleging a breach of trust a month before a new policy starts but does not mention it. If a claim follows, the new insurer would commonly rely on the known circumstances exclusion, and may also raise fair presentation.
Illustrative example 2: a lapse. A small charity forgets to renew for six months, then buys a new policy with a retroactive date at the new start date. A claim about a grant decision made during the lapse would usually fall outside cover.
Illustrative example 3: a removed trustee. A trustee removed by the board sues the other trustees. Many policies exclude such claims under the insured versus insured exclusion, although some carve back claims by former trustees or for defence costs.
Apex arranges trustee indemnity and charity management liability cover; a broker reads every enquiry.
If it is bought with charity funds, it must exclude criminal fines, regulatory penalties, criminal defence costs after a conviction for fraud, dishonesty or wilful or reckless misconduct, and liability for conduct a trustee knew was against the charity's interests. Policies also commonly exclude prior claims, known circumstances, bodily injury and property damage, pollution and professional services, subject to the wording.
Section 189 of the Charities Act 2011 allows trustees to buy the cover with charity funds only if the policy excludes specified liabilities, such as criminal fines and regulatory penalties. The law is designed so charity money does not protect trustees from the consequences of criminal or deliberately harmful conduct.
Often not. Many policies include an insured versus insured exclusion that removes claims brought by one insured person or the charity against another. Some wordings carve back claims by former trustees, whistleblowers or an insolvency practitioner, or still pay defence costs, so it is worth checking.
It can, if the retroactive date allows it. Under claims-made cover, a policy may respond to past acts provided the retroactive date is earlier and the matter was not known or already in dispute before inception. A lapse in cover can reset the retroactive date and leave a gap.
Not usually, where the policy contains a severability or non-imputation clause. These clauses commonly treat each trustee separately, so honest trustees keep their cover while the dishonest trustee loses it once dishonesty is established. The exact wording decides the outcome.
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