Trustee & Director Indemnity and Public Liability
Serving as a Trustee or Director in a community scheme comes with both authority and legal responsibility. While these roles are vital for good governance, they also carry personal risk. Indemnity insurance and public liability cover help protect individuals and the scheme from potentially costly claims.
What is Trustee and Director Indemnity Insurance?
Also known as Directors and Officers (D&O) Insurance, this cover protects Trustees and Directors against personal liability for:
- Decisions made in their official capacity
- Allegations of negligence or breach of duty
- Legal costs associated with defending such claims
It covers both legal defence costs and, where applicable, damages awarded against the individual, subject to policy terms.
Why It Matters
Without indemnity insurance:
- Trustees and Directors could be personally liable for legal costs and damages
- Even unfounded allegations can lead to expensive legal battles
- Personal assets could be at risk
In a volunteer-based role, this protection is essential to encourage capable individuals to serve.
Common Claims Under Indemnity Insurance
- Failing to enforce the scheme’s rules
- Negligent financial management
- Approving work without required member approval
- Mismanagement of maintenance projects
- Breach of fiduciary duty (link to article)
Public Liability Cover
Public liability insurance protects the scheme itself, rather than individuals, against claims from third parties for:
- Injury sustained on the property (e.g., a visitor slipping on wet stairs)
- Damage to third-party property (e.g., falling objects from the building)
- Legal defence costs arising from such claims
Legal Requirements
Under the Sectional Titles Schemes Management Act, the Body Corporate must have:
- Sufficient insurance to cover public liability risks
- Adequate Trustee/Director indemnity cover, as determined by members
HOAs are not bound by the STSMA but should adopt similar best practices through their constitutions.
Negligence, Duty of Care, and Documentation
Even with insurance:
- Trustees and Directors must act with due care and diligence
- All decisions should be recorded in meeting minutes
- Advice from managing agents, legal professionals, or engineers should be documented
Trustee and Director indemnity, along with public liability cover, are essential safeguards for effective governance in community schemes. They protect individuals from personal financial loss and ensure the scheme can meet its obligations to members and third parties.
ANGOR Property Specialists helps schemes assess their risk exposure, secure appropriate insurance cover, and implement sound governance practices.