By Alan Wilson

A NEW ruling over insurance cover for charity volunteers could lead to a fall in the number of people willing to become trustees of Scottish charities, according to local group Dundee Voluntary Action.

The Dundee-based Office of the Scottish Charity Regulator (OSCR), which took over all responsibility for charities in Scotland only last month, has ruled that no organisation should now provide its trustees with indemnity insurance, despite most of them having done so for many years.

The nub of the argument is the interpretation of section 67 of the Charities and Trustee Investment (Scotland) Act 2005, which deals with remuneration for services for charity trustees.

Up to now, most charities have taken out trustees indemnity insurance as an option within a package of insurance covers.

This offers protection to all members of a board of trustees from damages and legal expenses for which they are legally liable as a result of a “wrongful act” or any breach of trust or breach of duty.

However, OSCR’s interpretation of the act is that taking out cover for volunteer members of the board would constitute conferring “a personal benefit” on them and would therefore be a breach of charity rules.

The Scottish Council for Voluntary Organisations and the Scottish Federation of Housing Associations raised the issue with OSCR in a bid to have it clarified.

OSCR has responded by sticking to its interpretation and acknowledges that “this may have unfortunate consequences in discouraging some trustees.”

The Charity Commission in England has made a similar judgment.

Along with many other voluntary sector organisations, Dundee Voluntary Action (DVA) believes that the present position where volunteers will have to pay for the insurance cover themselves in order to be able to serve on boards will discourage people from serving.

And if that proves to be the case, many smaller charities and organisations will find themselves in serious difficulties.

In its newsletter, DVA states it is aware that some individuals volunteer to serve on boards of several charities, thus potentially requiring them to take out separate policies to cover themselves.

While the risk of being sued or something else going wrong resulting in legal action is not perhaps as high in the voluntary sector as it is in private industry, it remains a risk, the newsletter states.

Many housing charities are particularly worried by the situation.

Abertay Housing Association chief executive Jo Goodgame said, “We’re quite annoyed about it because it’s difficult enough to get people involved in charity boards without this insurance factor.

“The other problem is that most charities are already taking it out for their trustees and they will have to stop doing it.”

OSCR has questioned the need for such insurance but says it is involved in discussions with the Scottish Executive to see if it can resolve the problem.

Jane Ryder, chief executive of OSCR, said, “The position is that as we interpret the legislation, the payment would be a benefit in kind.

“We’ve been talking to the Scottish Executive about this and I’m sure we can find a resolution to what is clearly a subject that’s of interest, particular to the larger charities.

“We don’t want to discourage trustees from volunteering for charitable boards.”