Former principals and former employees of law firms who continue to act as trustees could be uninsured if they are accused of negligence warns Brunel Professional Risks.

This could put their property and other personal assets in the firing line if they are sued for compensation.  Trustees are exposed to this risk after they leave a practice if it subsequently closes, and then run-off insurance ceases six years later.

James Burgoyne, Director, Brunel Professional Risks says it is usual for PI cover to be arranged by the firm, not by individual practitioners.  It is therefore standard practice for former principals and employees to be covered by the firm’s insurance in respect of work performed on behalf of the firm, including personal appointments taken on behalf of the firm.  “Trusteeships are personal appointments, and consequently former staff often continue as trustees where they were originally appointed as part of the firm’s business,” said James Burgoyne.   “If the firm ceases or is unable to secure PI insurance then run-off cover commences, however this only lasts six years.  If statutory limitation does not apply – which would especially be the case if the trustee has continued to act during and after the run-off period – the trustee’s personal liability would be uninsured for new claims that arise after the cessation of run-off cover.”

Brunel believes that there could be many trustees who are unaware that they are exposed to risk.  “Think about a solicitor who acts administers a trust fund for a minor,” said James Burgoyne.  “They could easily still be acting as a trustee 21 years later, well after they retired from their former practice and a long time after run-off cover has expired. If they were relying on the firm’s PI cover and had not ensured other steps were taken to protect themselves, they could be facing significant personal risks.”

Trustees can buy stand-alone trustees’ indemnity insurance.  “This is a relatively low cost annual cover which applies to all of the trustees of the trust,” concludes James Burgoyne.