Charity trustees take on duties most volunteers never encounter. The role is unpaid, honorary in name, and carries the possibility of personal financial liability. Trustee indemnity insurance (TII) is the specialist product that responds to claims made against trustees personally. This entry sets out where the personal liability comes from, how the Charities Act 2011 frames the position, what Charity Commission guidance CC49 says trustees should consider, and how TII cover fits alongside a charity's other protections.
A charity trustee stands in a fiduciary position towards the charity. The trustee holds the charity's property, funds and decisions on trust for the beneficiaries and for the purposes set out in the governing document. The starting point in English law is that trustees are personally liable for breaches of trust, and the trust deed or Articles do not necessarily displace that liability.
Situations that can give rise to a personal claim include acting outside the charity's objects (an ultra vires decision, such as spending restricted funds on an unrelated purpose), negligent investment decisions, authorising unauthorised payments to a trustee or connected party, and failing to protect charity assets from foreseeable loss. Trustees may also be named where the charity itself is sued and the claimant argues that a specific trustee decision caused the loss.
Personal liability does not require dishonesty. A trustee who acts in good faith but falls short of the standard expected of a reasonably prudent person managing another's affairs may still be exposed. It is that ordinary, honest, and yet exposed trustee for whom TII is generally designed.
Four broad heads of claim recur. The first is breach of duty owed to the charity itself, where the charity — often through successor trustees or the Charity Commission — pursues a former or serving trustee for losses attributable to their conduct. The second is breach of duty owed to beneficiaries, where the intended recipients of the charity's activities claim that trustee decisions have deprived them of that benefit.
The third is third-party claims arising from trustee decisions: a supplier, landlord, grant recipient or member of the public who alleges that a trustee's decision caused them loss and names the trustee personally. The fourth is regulatory action, primarily by the Charity Commission under the inquiry, protective and disqualification powers set out in Part 6 of the Charities Act 2011.
The current statutory framework consolidates powers introduced by the Charities Act 2006. The relevant provision for TII is section 189 of the Charities Act 2011. It gives charity trustees a general power to arrange trustee indemnity insurance paid for out of the charity's funds, without needing the prior authority of the Charity Commission, provided three conditions are satisfied.
First, the governing document must not expressly prohibit the purchase of TII. Many older governing documents are silent on the point, and silence is generally read as not prohibiting. Where a governing document does prohibit TII, trustees would need to consider amending it before purchasing cover from charity funds.
Second, the insurance itself must not extend to certain excluded liabilities. Section 189(2) sets these out: liability to pay a fine imposed in criminal proceedings; liability to pay a sum by way of penalty to a regulatory authority for non-compliance with a regulatory requirement; the costs of defending criminal proceedings in which the trustee is convicted of an offence arising out of fraud, dishonesty or wilful or reckless misconduct; and liability to the charity arising out of conduct that the trustee knew, or must be assumed to have known, was not in the best interests of the charity.
Third, the trustees must be satisfied that arranging the insurance is in the best interests of the charity. That is a decision recorded in trustee minutes, and one trustees are expected to revisit periodically rather than treat as a one-off resolution.
Where the governing document prohibits TII, or trustees are uncertain whether their proposed cover falls foul of the excluded-liabilities test, an application to the Charity Commission for consent may still be needed. Most modern charities operate comfortably within section 189.
The Charity Commission publishes guidance under the title Charities and Insurance, referenced as CC49. It is not law, but it explains how the Commission expects trustees to think about the insurance decisions in front of them, and it lists the categories of insurance a charity may need to consider — property, employers' liability, public liability, professional indemnity where the charity provides advice, motor cover for charity vehicles, and TII among others.
On TII specifically, CC49 makes three points that trustees should take seriously. Trustees themselves must decide whether TII is appropriate for their charity, taking into account the nature and scale of activities, the level of risk in trustee decisions, and the cost of cover against the charity's resources. TII is not a mandatory purchase; no rule requires every charity to have it. And CC49 reminds trustees that TII does not, and cannot, protect trustees against the consequences of deliberate wrongdoing.
Trustee indemnity insurance is at its heart a professional-indemnity-style wording adapted for the charity governance context. Cover generally responds to civil claims made against a trustee arising from a wrongful act committed in that capacity. The wrongful act is defined widely — actual or alleged breaches of duty, breaches of trust, misstatements, errors, omissions and the like — and cover extends to legal defence costs incurred in responding to the claim.
Many TII wordings also extend to the costs of responding to a Charity Commission inquiry or a statutory investigation, subject to conditions and limits. Employment tribunal claims brought against trustees personally — where a former employee alleges that trustees are responsible for a discriminatory decision, for instance — are commonly picked up, though the scope of employment cover varies between insurers. Where third parties name trustees personally in proceedings against the charity, TII typically responds to the trustees' element of the defence, with the charity itself carrying its own liability under public liability or another appropriate policy.
Every TII policy will exclude deliberate acts, fraud and criminal acts, though almost all wordings require final adjudication (a court finding, not merely an allegation) before the exclusion bites. This preserves defence-cost cover during the proceedings themselves. Prior known claims and circumstances are excluded, which makes accurate disclosure at inception and renewal important.
Insured-versus-insured claims — one trustee suing another — are often excluded, though carveouts for whistleblowing, derivative actions brought by successor trustees and shareholder-style claims by members are common. Bodily injury and property damage are excluded because they belong on public liability or employers' liability policies. Fines and penalties imposed as a matter of regulation or criminal law are excluded, in line with the statutory position under section 189.
Retroactive dates matter. TII is written on a claims-made basis, which means the policy responds to claims first made during the policy period, regardless of when the underlying act took place. A retroactive date limits how far back the policy will look. Continuing trustees should ensure the retroactive date covers their period of service.
Trustee indemnity insurance is essentially the charity-sector equivalent of directors' and officers' liability insurance (D&O). The two products share a common lineage in claims-made professional-indemnity wording. The differences are ones of emphasis: TII wordings focus on breach of trust, breach of the duties owed under the Charities Act 2011 and charity-specific regulatory action, whereas D&O wordings are geared to companies-law duties and shareholder actions.
A charity that is also a company (a charitable company limited by guarantee, or a CIO with a corporate structure) may benefit from a wording that combines TII with D&O elements. Cover typically excludes commercial activities outside the charity's objects, and trustees sitting on trading subsidiaries may need separate D&O. Some TII wordings extend to employees carrying out delegated trustee duties, which is useful for larger charities with senior management teams exercising delegated authority.
Small charities with straightforward operations, few paid staff and minimal asset holdings often decide TII is not proportionate to their risk profile. That is a legitimate trustee decision provided it is made deliberately and revisited.
Charities that more consistently buy TII are those in the medium range — annual income around £500,000 to £10 million — with paid staff, property or asset holdings, and complex trustee decision-making. Grant-making foundations with investment portfolios and payout obligations tend to buy cover, as do charities recruiting professional trustees (lawyers, accountants, investment professionals) whose exposure is higher and who often require TII as a condition of accepting the role. Larger charities with complex governance, cross-border activities or high-profile programmes generally hold TII alongside other management liability lines.
Trustees who buy TII should be clear about what the cover does not achieve. TII does not shield trustees from Charity Commission scrutiny; the Commission's statutory powers to inquire, protect charity property and disqualify trustees operate regardless of insurance. TII does not cover deliberate breaches of trust or dishonest conduct once those are established on their merits. TII does not protect the charity's own assets from trustee mismanagement — that is what good governance, internal controls and financial management do. And TII is not a substitute for the underlying duty of care; a trustee who relies on insurance to justify a lower standard of decision-making has misunderstood the product.
Because TII is written on a claims-made basis, renewal is not a routine exercise. Continuing trustees carry historic decisions with them, and any gap in cover — or a shifting retroactive date — can leave those historic decisions unprotected. Trustees should confirm at renewal that the retroactive date has not moved backwards without their attention.
Governance changes matter to the insurer. New trustees joining part-way through the policy period should be added by endorsement in some wordings; others update automatically at renewal. Departing trustees may benefit from a run-off provision that covers claims made after they leave the board, in respect of acts committed in office. Where the charity's activities are changing — a new grant programme, a merger, the acquisition of a trading subsidiary, or a move into regulated activity such as care or education — the scope of cover should be reviewed. Aggregation is another point worth checking: some wordings aggregate all claims arising from a single wrongful act into one limit; others treat each trustee separately.
Apex Insurance Brokers Limited is an FCA-authorised insurance broker (firm reference number 724952) specialising in professional indemnity and management liability for professional firms and organisations, including charities in the £250,000 to £25 million income range. The firm is led by Matthew Bartlett as director, holding SMF3, SMF16 and SMF17 approvals. Apex arranges trustee indemnity insurance with UK-authorised insurers and Lloyd's syndicates and can review existing wordings for retroactive-date discipline, section 189 alignment and the interaction with any D&O cover held by trading subsidiaries.
Trustee indemnity insurance is a specialist policy that responds to civil claims made against a charity trustee personally, arising out of a wrongful act committed in that capacity. Cover typically includes legal defence costs, damages awarded against the trustee, and the costs of responding to a Charity Commission inquiry, subject to policy conditions, limits and the excluded categories set out in section 189(2) of the Charities Act 2011.
Yes. The starting position in English law is that charity trustees are personally liable for breaches of trust and for losses caused to the charity or third parties by their conduct as trustees. Statutory relief may be available in some circumstances (for example under section 191 of the Charities Act 2011 where the trustee has acted honestly and reasonably), and modern governing documents often include indemnity provisions, but neither removes the personal exposure entirely.
Yes, provided the conditions in section 189 of the Charities Act 2011 are met: the governing document does not prohibit it, the insurance does not extend to the excluded liabilities set out in the section, and the trustees have decided that arranging the cover is in the best interests of the charity. Where those conditions cannot be met, an application to the Charity Commission for authority may still be possible.
Charity Commission guidance CC49 (Charities and Insurance) treats TII as one category of insurance charities may wish to consider. The Commission does not require charities to buy TII. It expects trustees to decide the question themselves, taking into account the charity's activities, risk profile and resources, and to record that decision. CC49 also reminds trustees that TII cannot protect them from the consequences of deliberate wrongdoing.
The two products share a common professional-indemnity heritage but are geared to different governance frameworks. TII focuses on breach of trust, duties owed under the Charities Act 2011 and Charity Commission action; D&O focuses on companies-law duties and shareholder-style actions. A charitable company or CIO may hold a combined wording. Trustees also sitting on trading subsidiaries may need separate D&O for those directorships.
No. TII is not a mandatory purchase, and small charities with straightforward operations and modest assets often decide the cover is not proportionate to their risk. The decision is one for the trustees, revisited from time to time as the charity's activities and governance evolve. Charities with paid staff, property, investment portfolios, complex programmes, or professional trustees who require personal cover as a condition of serving are the ones for which TII is more consistently in scope.
Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Firm reference number 724952.