Potential trustees 'put in fear of being held liable'

Fears over personal liability could be dissuading potential trustees from joining charity boards in the wake of the Charities Act.

In the past, charities had to consult the Charity Commission before buying personal liability cover for trustees. But the 2006 Charities Act allows voluntary organisations to buy policies on their own decision.

Some charities believe this is causing panic amongst potential trustees, who misconstrue the risks.

Neil Gadsby, chair of the Katherine House Hospice in Banbury, Oxfordshire, said: "For the first time, we're having problems getting trustees because they're worried about becoming personally liable if things go wrong.

"We've received a number of flyers from insurance companies using language that instils fear, but I've yet to meet a trustee who can say what they're afraid of."

Philip Kirkpatrick, a lawyer at legal firm Bates, Wells & Braithwaite, accused accountants and insurance companies of over-stating the risks.

"The mainstream insurance market often thinks charities are riskier than they actually are, and don't understand the claims that can be made on those kind of policies," he said. "This leads to the charity sector having to pay premiums that are far too high for risks that are being badly assessed by the insurance market."

The Charity Commission said the likelihood of trustees paying out of their own pockets towards a financial loss was extremely small.

Jolanta Lasota, head of the Governance Hub, said personal liability was a red herring. "The main concern should be getting the right information to trustees when they join a charity," she said. "Organisations need to get a lot better at doing this."

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