Ecclesiastical commercial director Adrian Saunders talks about how charities could be exposing themselves to the risk of legal action from the very people they are trying to help due to a lack of appropriate cover
When life gets hard, it’s natural to turn to someone for advice – which is why, every year, huge numbers of Britons contact charities for help and guidance.
But in our experience, about one-third of charities that provide professional advice fail to buy professional indemnity cover, exposing themselves to costly legal claims and damages while possibly even threatening the future viability of their organisation.
At the heart of the issue is a problem of awareness for charities. First, not realising that what they give is actually professional advice and, secondly, that they could be sued for the consequences of that advice.
It’s a knowledge gap that insurers and brokers alike need to help close.
Dispensing professional advice
For some charities it’s clear that they provide professional advice – the Citizens’ Advice Bureau being an obvious example. For others it can be less clear-cut. In reality, providing professional advice can be as simple as offering a question and answer section on a website, or providing recommendations on a leaflet for further information.
Charities are just as likely to be sued
Many charities believe that they cannot be sued for providing advice because they don’t charge and question who would sue a charity anyway? Charities are as much at risk of being sued if they are found to be negligent.
The law says that a charity will have better knowledge of their subject matter than the people they are advising and, if that advice proves to be misleading, they could be held accountable.
And it’s a sad reflection on today’s compensation culture that some see charities as a soft touch and easier to bring a case against than a commercial operation with more resources to defend itself.
Reducing the risk
Of course there’s much that charities can do themselves to help reduce the chance of being sued. Good risk management is key.
All staff should be well trained, suitably qualified for their roles, and fully compliant with any relevant legislation, for example. And employees – particularly new volunteers – should not be put in a position where they can give advice that could get the charity into difficulties.
The insurance industry, though, can do more to help charities not only get their internal risk management right, but also to raise awareness of the nature of providing professional advice and change the perception for many that professional indemnity insurance is the preserve of paid professions like accountancy and law.
The future viability of many charities may well depend on it.
Adrian Saunders has more than 30 years’ experience of insurance in both underwriting and broking. Prior to joining Ecclesiastical, he held senior roles at Marsh, Zurich and Hiscox.