Charities, Community Groups and Contractual Insurance Obligations
One issue that the team at Ladbrook are seeing more and more commonly is that of ever-increasing obligations placed upon charities that are working in partnership with authority organisations. Some of these requirements are at best stringent and at worst entirely inappropriate. We thought that we would record some of our experiences to help or guide those in similar positions.
Of course it is important that any group if entering a contract that places obligations on the groups insurance arrangements should meet those terms, after all, they have been agreed and breaching the contract by not purchasing the agreed insurance cover could have serious implications. We often help our own clients interpret and read contract wordings to give them peace of mind that their insurance policy satisfies the contractual agreement.
Most of the time, the contracts are between a charity or community group discharging services in their community and a local authority or the police or fire service. Each authority by area and nature may have their own view of what constitutes adequate insurance and we see varying demands placed on groups by cover section and by limit.
For example. Public Liability Insurance demands used to be commonly £5,000,000 but increasingly we see demands for £10,000,000. As an insurance broker this is not normally a significant issue to increase cover to incorporate this, most insurers can accommodate this cover. However, in some instances, it can present a challenge. For example, while Markel can provide £10,000,000 of cover on many of their policies, they cannot on their Charity and Community policy.
The other common request concerns Professional Indemnity Insurance. Many charities organise this cover if they are discharging services. Increasingly, we have seen contractual requirements become more demanding in two respects. Firstly, in the limit of cover where some contractual obligations for ‘PI’ have been stipulated at £1m, £2m and even £5m. These are cover limits that medium and larger charities may organise as standard but for a smaller group, it is most likely cover well above that in place. Secondly, most PI cover is written on an aggregate basis. This means that the indemnity cover is like a pot and each claim reduces the level of remaining cover. ‘Any One Claim’ cover is superior, it allows any amount of claims, each up to the indemnity limit. Many contracts that we see are stipulating that high levels of PI cover are organised on an ‘any one claim’ basis and this can increase the costs of insurance substantially.
With some clients, we do know that they have had some success pushing back on the requested cover. In some cases, we have seen this after the client has signed a contract and then subsequently been able to negotiate a lesser insurance cover obligation. Of course, the best time to discuss insurance requirements is before any agreement is in force! Don’t always take the request at face value, some commission authorities will discuss cover and relent on over-bearing demands.
Sometimes though, there is nothing that can be done. At Ladbrook, we insured a tiny community music group who were delighted when they were invited to play in the airport lounge. Sadly, the event had to be cancelled because the airport demanded a whopping £50,000,000 of public liability insurance to allow the group to play on site. One can understand the high liability requirements for a group working air-side, an environment that is the sole rightful place of specialists. It is harder to imagine why a group playing a Beatles medley to travellers enjoying a per flight glass of wine might pose the same risk! Sadly, the airport authority were not for budging.