Charity Insurance | Social Enterprises | Voluntary Organisations | Community Groups

Professional Risks for Charities

When we think of professions, for many people solicitors, lawyers, doctors or consultants are the sorts of roles that spring to mind.  Yet, many of our clients are engaged in some degree of professional activity.

What is professional advice though?

Well, broadly speaking it includes organisations providing advice, design, specification or another professional service.  For a lot of charitable groups, advice is the common area.  It might be supporting service users with housing or benefits advice, some of our larger voluntary umbrella groups provide HR or accountancy consultancy to other charities or counselling or training services.

Whether the charity charges for these services or not does not make any difference, if the service user has a reasonable expectation that the group are providing something on a professional basis, then a risk exists that they might seek reparation if the service provided proves to be insufficient.

Risk Assessments

Charities are often used to conducting risk assessments for their activities.  If you are organising an event or providing services in the home, risk assessments are often conducted to consider health and safety considerations.

In professional activities, there might be different considerations but it remains essential to consider what could go wrong once your services have been provided.  You should consider what the consequences are for your organisation if a situation arises where defective advice has occurred.  The purpose of a risk assessment is to then consider the controls that you have in place currently and any further steps you should take to limit the chances of this occurrence or restrict the financial impact that it might have.

The Risk of Defective Advice

Public liability insurance often can be extended to include advice being given alongside a product that is being supplied.  However, this is normally limited cover as it is commonly restricted to only providing protection against accidental loss or injury, not financial losses.

This is why Professional Indemnity Insurance (sometimes called Errors and Omissions cover) is essential if a service user might suffer a financial loss because your group failed in the professional duty you owed to them.

Professional Duty

If a charity operating services from a premises is to consider the safety of people at that premises, it must only do so to the extent that a reasonable person.   The responsibility in discharging professional duties extends further and this needs to be considered by the group.  How do you comply with these duties?

You owe a duty of competence, that is to say a fair, reasonable and competent level of services in your services.  Professional Indemnity covers defective advice, when it can be demonstrated that this has failed.

We Only Give Advice for Free Though!

As long as some simple tests are met, whether or not your charity dispenses professional services for a fee or not is irrelevant.  This is a mistake that some people do make, after all, if you are doing someone a favour or providing some support for free, surely it is up to the recipient to judge whether they rely on your advice?

The typical tests that must be met are that while a contract might not exist for the provision of professional services, for professional duty to be established, there has to be a special relationship.  The advice must also be given by someone who holds themselves out to be suitably equipped to offer it and the foresight must be there to think that it would be relied upon by the recipient.

While in law, the professional duty is not owed to scenarios where advice is casual, from the criteria laid out, it is easy for charities to easily meet the criteria.

Legal Fees and Compensation

If an allegation is made against your charity that defective advice has led to a loss, then in the first instance, your priority is to get professional advice yourself.  Professional Indemnity cover will pay for the cost of defence, even if it is dealing with a frivolous claim against your group.

If damages are awarded, then your cover needs to have the scope to cover costs awarded to the claimant.

Insistence on Cover

For some groups, professional indemnity cover is not a question, it is a requirement.  Increasingly, we are seeing local authority contracts come attached to larger requirements for extensive professional indemnity cover.  Charities that have bid for services, find themselves needing to arrange £2,000,000 of cover and upwards in some cases.  At times, we have helped clients successfully push back on inappropriate cover limits, you can read more about that in our contractual obligations article.

Ensuring Competence in Your Charity

If your charity is involved in providing professional services, it is worth considering and documenting how you make sure that your skilled colleagues are qualified to provide these services.  As well as recruiting the right people, perhaps there are professional qualifications that you might insist on for those dispensing advice.

Formal competence programmes should exist to allow the charitable management team to ensure that any advice is of a suitable quality and this should include recording the professional development of those involved in dispensing it.

It is also important to record conversations, correspondence and interactions where professional services are discharged.  Not only does this allow for the quality of ongoing work to be checked and improved but such records will prove vitally important if your group finds itself defending a claim  Essentially, get things right and demonstrate that you have too.

More Charities need PI Cover

People are more litigious now than ever before.  The chances of a claimant seeking reparation for defective advice are higher now than ever in our history.  It is common sense for any charity that might touch on professional services to consider whether there is a risk that defective dispensation of those services might cause losses to their service users.  Furthermore, more authorities are insisting on cover being in force when project funding is being arranged, check your contracts carefully to make sure you are meeting the requirements imposed upon you.

If you would like any advice on the professional advice or service that your charity performs, feel free to get in touch, we would be proud to help.

Related:

Ten Point Guide to Professional Indemnity for Charities

The Difference between Public Liability and Professional Indemnity

Professional Indemnity Insurance for Charities