Trustee Insurance should be an important consideration for lay trustees. In a recent high-profile dispute between the Earl of Yarmouth and his parents, Lord and Lady Hertford, Trustees came under fire over the handover of management of the multi-million pound Ragley Hall Estate.

The trustees were accused of misconduct, leading to a stressful and costly court case. In the end, the court found in favour of the trustees, but as the UK becomes increasingly litigious, trustee insurance offers important protection.

The Role of a Trustee

As a lay trustee of a private trust or charity, you are responsible for protecting the interests of the trust and its beneficiaries—but who protects you if something goes wrong? Trustees are legally accountable if they make a mistake. While professional trustees have professional indemnity insurance, non-professional lay trustees face the same unlimited personal liability, often without any protection. Trust and trustee insurance is designed for non-professional trustees and operates similarly to professional indemnity insurance by covering financial loss, legal costs, and damages resulting from errors or alleged breaches of duty made during trust management.

Trustee Case Study – Ragley Hall Trusts

Castleacre Insurance Director, Hugo Johnsen, says in response to the recent Ragley Hall Trusts case

‘This particularly prominent case showed how trustees can unwittingly be drawn into complex family disputes and how they can be pulled in different directions by the competing personal interests of beneficiaries. The court decided in favour of the trustees in this instance, but had the decision gone the other way, it would have resulted in huge personal and financial costs for the trustees.’

The Earl of Yarmouth, who is a beneficiary of the family’s Ragley Trusts, argued that the appointed trustees were not acting in the best interests of all the beneficiaries. He claimed that the trustees were unduly influenced by his parents, who had decided that he was no longer the best person to take over the estate, contrary to indications made to him at an earlier stage.

The Earl then decided to take the trustees to court, accusing them of misconduct with the aim of having them removed from their role, although the trustees had the full support of other beneficiaries. Had the trustees been found guilty of misconduct, they would have been removed from the trust and would have been liable for legal fees and damages to the beneficiaries or the trusts. In this instance, the judge determined that the trustees had remained professional and cooperative throughout and that the primary cause of the dispute was not due to their actions but a ‘feature of the damaged and fractured relationship he (the Earl of Yarmouth) now has with his parents.’

Trustees Face Unlimited Personal Liability and Trustee Insurance Offers Invaluable Protection

At the same time, as more families use trusts to mitigate inheritance tax, family structures are becoming more complicated, with fractured interests. This has undoubtedly left trustees increasingly exposed to claims, particularly in relation to private trusts where there are multiple individual beneficiaries.

Trustee Liabilities – How can Trustee Insurance help Trustees and the Trust itself?

A trustee indemnity insurance policy provides financial and legal support for trustees faced with claims from alleged mistakes. This includes:

• Paying defence costs to defend a trustee
• Investigation expenses
• Any damages for which the trustee is found liable
• Past, present and future trustees
• Paying the trust where it has a legal obligation to reimburse a trustee. This can help preserve the trust’s assets.

Hugo Johnsen says

‘ It hasn’t really been a level playing field for lay trustees until now – working with a leading insurer, we have designed a policy which will protect lay trustees against claims made against them.’

Useful Trust & Trustee Information

Download our Trustee Brochure and learn more more about trustee insurance

The government website has helpful information about Trusts and their management.

The Society for Trust and Estate Practitioners is a professional organisation where you can find articles and professional trust practitioners –  visit www.step.org