Insurance considerations, perils and pitfalls

COMMUNITY ASSET MANAGEMENT

INSURANCE CONSIDERATIONS

PERILS & PITFALLS

Euan Drysdale – Keegan & Pennykid

BASIS OF THE ASSET TRANSFER

There are a variety of ways that the management of the assets may be transferred, ranging from a “Management Agreement” through to full transfer of ownership.

It’s essential that you clearly understand the basis on which you’ll proceed and the respective party responsibilities.

OPTIONS

1. Management Fee paid for the running of the asset, Local Authority retaining ownership & control of the Asset.

2. Assets leased to local Community to operate and provide facilities, Local Authority retaining Insurance responsibility for the Heritable Asset – the building(s).

OPTIONS

3. Asset leased to local Community with full responsibility for maintenance and Insurance of all the assets.

4. Full transfer of ownership of all the Assets to the local Community, thereby passing on full responsibility for all the Insurance requirements.

THE BUSINESS MODEL

Depending on which of the business models is

used, will determine the Community’s basic

Insurance responsibilities and any residual

control by the Local Authority or other

bodies.

OPTION 1

The Community will need to arrange their

Insurances to cover the operational risks but will

probably need these to tie in to some extent with

requirements laid down by the ceding Authority.

OPTION 2

Again the Community will principally have to cover their operational risks, but depending on the arrangement may become responsible for the Insurance of operational plant, equipment and fixtures and fittings.

This might be by a full transfer of ownership or a lease agreement.

OPTION 3

The Community will be obliged to Insure all the assets under the terms of the lease with the interest of the Local Authority noted in the Insurance.

If the Authority insists on a policy in joint names then it should be kept separate from the policy effected for the operational risks –WHY?.

OPTION 4

A full transfer of the assets will oblige the

Community to effect Insurance for ALL the

assets and operational risks and they will have

to ensure that they can sustain the business.

PRINCIPAL RISKS

Loss or Damage to the Buildings.Loss or Damage to Contents, Plant,

Machinery etc.Business Continuity following a loss.Liabilities – To the Public, To Staff and

Volunteers.Governance risks – Management and

Employment Practises Liabilities.

BUILDINGS

If leased, this will be the key document in determining the extent of cover that you’ll need if any.

Are the Buildings “Listed”?Importance of getting the Reinstatement

Value right.Taking account of VAT.

CONTENTS & OTHER PROPERTY

Ensure that you have an up to date asset register that shows current Replacement values.

Security & Protection considerations.

BUSINESS CONTINUITY

Disaster Recovery Planning –

Impact

Likely recovery period

Mitigating factors

PUBLIC LIABILITY

What considerations do you need to take into account in setting the Limit of Indemnity ?

What about Local Authority stipulations in any leasing agreement?

Are there any particular additional risks that need consideration in selecting the cover?

ABUSE

What will you need to demonstrate to ensure that you have appropriate cover for the risk of allegations of “Abuse” made against the Organisation?

There are considerable differences in the way in which different Insurers may approach this risk and provide cover – Be Aware!

EMPLOYERS’ LIABILITY

Will be required even if you run entirely with Volunteers.

Appropriate Risk Assessments will be essential.

Specific training may be required for certain tasks.

What about protective clothing & equipment?

EMPLOYMENT PRACTISES LIABILITY

Exactly what does this cover?How does it differ from ordinary “Legal

Expenses Insurance”?What are the benefits over Legal Expenses

type covers? Can you afford NOT to have it?

MANAGEMENT LIABILITY

Cover for Trustees, Directors & Officers of the Organisation.

There is a personal “Duty of Care” implicit in the running of the Organisation.

Principally covers the “Governance” risks since the personal assets of Trustees, Directors or Officers may be at risk.

OTHER CONSIDERATIONS

You may need to consider other types of cover depending on the nature of your activities. For Example:-

Pensions. Engineering Inspections.Fidelity Insurance.

QUESTIONS ????

CONTACT DETAILS

Keegan & Pennykid (Insurance Brokers) Ltd.

50 Queen Street

Edinburgh EH2 3NS

Telephone: 0131 225 6005

E-Mail: [email protected]

Website: www.keegan-pennykid.com