How Trustees Can Avoid Personal Liability
Protect yourself from personal liability with legal strategies, proper insurance, and governance best practices.
Understanding Trustee Liability
Trustees can face personal liability for scheme-related matters if they breach their legal duties or act negligently. Personal liability means trustees may be personally sued and required to pay damages from their own resources, separate from scheme funds.
The good news: trustees can significantly reduce personal liability through proper governance, insurance, and legal protections. This guide explains how.
Sources of Personal Liability
Trustees face personal liability in several areas:
- Financial mismanagement: Improper use of scheme funds, fraud, embezzlement
- Breach of duty: Failing to act in residents' interests, conflicts of interest
- Negligence: Failure to maintain common property, safety hazards
- Discrimination: Unfair rule enforcement, discriminatory decisions
- Breach of STSA: Non-compliance with statutory requirements
Legal Protections for Trustees
The STSA provides several legal protections for trustees who act reasonably and in good faith:
- Good faith protection: Trustees are protected if they act in good faith and reasonably
- Indemnity: Schemes must indemnify trustees for actions taken in their official capacity
- Immunity: Trustees have immunity for certain decisions made in good faith
Insurance Protection
Trustee liability insurance is essential protection. This insurance covers legal costs and damages for claims against trustees.