Chartered Surveyors that specialise in management work for landed estate clients (or land agency) are often asked to act as a trustee, where some of their client’s property assets are owned via a trust. The trusts are private, non-charitable and their purpose is the tax-efficient ownership of the property assets on behalf of the specified beneficiaries; usually members of the client family. The client’s accountant and solicitor are often appointed as trustees as well, perhaps with one or two non-professional trustees who tend to be family members or long-standing, trusted friends. Historically, those trusted individuals were happy to act as trustees to a family that they counted as close friends, believing it inconceivable that a claim could be brought against them. But the frequency and quantum of such claims are rising and there is now a growing recognition that such a trust should carry Trustees Liability Insurance to protect the trustees.
While the solicitor and the accountant are protected under their respective Professional Indemnity (PI) policies, trusteeship is not a normal Royal Institute of Chartered Surveyors (RICS) regulated activity, and unless the RICS-qualifying insurer has been informed of the trusteeship activities, that insurer could seek to avoid liability in the event of a claim. And any lay trustees such as wider family members or friends will have no protection at all.
In 2011, a claim was brought against the trustees of just such a private trust by the parent of one of the trust’s beneficiaries; the claimant alleged that the trustees had been negligent in their duties towards the beneficiary; defined as a ‘Wrongful Act’ for the purposes of insurance. Cox Mahon acted for a RICS member practice that provided land agency services to the family and the fee earner concerned acted as a trustee. The land agent’s professional indemnity insurers only agreed liability after a lengthy and intense negotiation. In the end, they paid out over £73,000 but made it clear that it would not cover any other trusteeship-related claims. Fortunately, in this particular case there were no non-professional trustees, who could otherwise have been personally liable.
Tips for RICS member practices;
1. We recommend that RICS member firms undertaking rural estate management work, should take steps to identify any client-related trusteeships that its fee earners have taken on; such trusts will almost certainly appear as Co-insureds on the client’s property/estate insurance policy schedule.
2. Where fee earners are acting as trustees, take steps to identify who the other trustees are, and which of them would have no automatic protection in the event of a claim.
3. Ask your insurance broker for written confirmation that the practice’s PI insurers have noted the practice’s trusteeship activities.
4. If your PI insurer advises that their policy does, or henceforth will, exclude trusteeship claims, ask your PI broker to obtain terms for a separate policy to cover the fee earners’ activities as trustees.
5. Where your fee earners are undertaking trusteeship, alongside some non-professional trustees, consult with the board of all trustees as a whole about their potentially significant individual liability in the event of a claim.
6. If appropriate, ask your PI broker to obtain terms for a Trustees Liability Insurance policy to cover all of the trustees. There are two or three insurers that will consider such risks and Cox Mahon acts for a number of such trusts, ranging in asset size from £5m, up to £150m.