Charity Risk & Advice: Professional Indemnity v Public Liability
The difference between public liability and professional indemnity insurance
Many charities are engaged in advising their own members, service users or even the general public as a normal part of their activities. Some though do not even consider that they might be seen as a trusted expert or that this in itself, might carry a risk if something went wrong.
There are a wide range of charitable activities that might be construed as advice. One of our own clients provides one to one advice to people in their local Polish community. Their activities go beyond simply signposting to other services, because they also help with translating forms and even provide advocacy support for individuals where appropriate. This advice is there to support their users with issues across housing, schooling, health, services, the local authority or employment. Although rare, they are also supporting users with highly sensitive issues such as human trafficking, children in care and even slavery.
Other charities we work with publish information on websites, newsletters and newspapers. All of this content could expose the organisation as any of it could construe ‘advice’.
So where does public liability and professional indemnity differ and which might your charity need?
You would rely on public liability insurance to protect your charity if you were sued because you caused damage to property or injury due to negligence in your own activities. However, public liability insurance specifically excludes losses suffered as a result of advice or information that your charity might provide which, when acted upon, could cause harm or damage to third parties.
If there is a possibility of being sued for wrongful advice or information then organisations should seriously consider taking out professional indemnity insurance.
A professional indemnity insurance policy will indemnify the charity against liability for damages incurred from neglect, error or omission committed in good faith by the charity. This would protect the charity providing one to one advice in the event that their error in completing a form caused a financial loss to a service user.
Most professional indemnity insurance policies extend to include libel and slander committed in good faith on behalf of the organisation. This would provide protection for the charity that publishes a newspaper or newsletter too.
Each policy will have a limit of indemnity or maximum amount paid for each and every claim or the total of all claims in any one period and any such limit can vary from £100,000 upwards. The higher the limit, the greater the cost. Most policies will also exclude the first £250 or £500 of each claim.
Most policies are on a ‘claims made’ policy wording which means that only claims or losses notified to the insurance company during the period of insurance are valid. However, additional cover can sometimes be obtained known as ‘run off cover’ which can be purchased when an organisation closes but when there still remains a possibility of a claim being made against the organisation or it’s officers after the date of closure. Such additional cover can be made available for up to six years after an organisation closes.
Professional indemnity insurance is a specialist area and not every charity will have the need for it. Much will depend upon the activities of the organisation and whether or not any advice is given.
At Ladbrook, we work with a wide range of voluntary sector organsiations. If you feel you could do with some support in respect of your activities, give us a call, we would be delighted to hear from you. After all, giving advice is what we do too!