Charity trustees in England and Wales carry personal responsibility for the way a charity is run. A trustee's protection is not automatic — where a trustee acts in breach of trust, in breach of fiduciary duty, or negligently, they can be pursued in their personal capacity for the loss the charity has suffered. Trustee indemnity insurance, often abbreviated to TII, is the product designed to respond to that exposure. It is not the same as the professional indemnity insurance a firm of solicitors, accountants or surveyors buys, and the two are frequently confused. This entry sets out where the boundary sits, what the Charities Act 2011 permits, and how a trustee board might approach cover in practice.
A trustee owes duties that arise from several sources at once. The Trustee Act 2000 sets a statutory duty of care — trustees must exercise such care and skill as is reasonable in the circumstances, taking into account any special knowledge or experience the trustee has or holds themselves out as having. On top of that sit the common-law fiduciary duties: loyalty to the charity's purposes, avoidance of conflicts of interest, and the obligation not to profit from the trust. A breach of trust — misapplying charity funds, straying beyond the objects, or making an investment decision without proper regard to the duty of care — can expose the trustee personally. Negligence in running a project, in dealing with employees, or in oversight of contracts can produce a similar result.
The Charity Commission's guidance in CC49 (Charities and Insurance) treats trustee liability as a risk boards should assess. Small charities are not exempt; they are simply less likely to have thought about it.
Section 189 of the Charities Act 2011 is the provision that permits a charity to pay the premium for trustee indemnity insurance out of charity funds. Before the current framework, this often required Charity Commission consent; the position now is that trustees may authorise the purchase provided the governing document does not expressly prohibit it, and provided the policy contains the statutory exclusions. Those excluded matters include liability for fines imposed in criminal proceedings, liability arising from conduct the trustee knew (or was reckless as to whether) was in breach of trust or breach of duty, and defence costs incurred in defending criminal proceedings where the trustee is convicted. In effect, section 189 permits the charity to insure honest mistakes and negligence but not deliberate wrongdoing.
Trustee indemnity insurance covers the trustee's personal liability for acts and omissions in their role as a trustee. Professional indemnity insurance covers a firm or individual against claims arising from professional services provided to clients. The two products answer different questions. A charity that also delivers professional services — a legal advice charity, a housing advice service, a counselling body — may need both: PI for the advice given to service users, TII for the governance decisions made by its board. Where a trustee is also an employee (a common arrangement in smaller charities where the founder sits on the board and works in the operation), the dual role needs mapping carefully. Employment-related claims may fall to employment practices liability rather than TII, and any professional acts carried out as an employee may need PI rather than TII to respond.
A TII policy will usually respond to defence costs and awards arising from claims alleging breach of trust, breach of duty, negligence, misstatement, and wrongful acts in a trustee capacity. Standard exclusions include fraud and dishonesty, deliberate breach of duty, criminal fines, and liability assumed under contract beyond what would arise at common law. Limits are usually written on an each-and-every basis for smaller charities and on an aggregate basis where the exposure is heavier. Retroactive cover matters for boards where trustees have served for some years — the policy responds to claims made during the policy period, but the wrongful act may have occurred earlier.
Consider a local charity with an annual income of £400,000 and eight trustees. It buys TII with a limit of £2 million each-and-every claim. A trustee, acting without taking advice, moves a substantial part of the charity's reserves into an unsuitable investment product. The investment loses £150,000. The Charity Commission opens a regulatory case. The remaining trustees pursue the trustee who authorised the decision for breach of the duty of care under the Trustee Act 2000. The TII policy responds to defence costs and to the settlement paid to the charity, protecting the trustee's personal assets. This example is illustrative only — cover in any real case depends on the policy wording, the facts, and the trustee's conduct.
A useful starting point is to map the charity's structure — incorporated or unincorporated, wholly volunteer or with employed trustees — before considering limits. Where the charity delivers regulated or professional services, the board should consider both TII for governance and PI for the service line. Where reserves are held and invested, the investment power in the governing document and the process for taking advice will be relevant to the risk assessment.
Apex Insurance Brokers arranges PI cover for a range of regulated professions, including solicitors' PI, accountants' PI and IFAs' PI. Where a professional also sits on a charity board, the interaction between their firm's PI and the charity's TII is a conversation worth having early rather than late.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952. This entry is general information, not advice on any particular policy.