November 2012

Trustee liability – the unexpected nightmare

Most people in business are familiar with the concept of liability. As a company director or officer, your personal assets could be at risk if the business runs into trouble.

The same problem can arise with a trust or incorporated society.

These organisations often have a culture of good works and volunteerism rather than strict accountability. However, officers, directors and trustees may be placed in a position of responsibility for significant assets. If trust assets are mismanaged, a case could be mounted to obtain damages from the personal assets of trustees.

Imagine if the IRD or a disgruntled stakeholder came after your family home. It’s a very real risk.

No funds, no protection

Those trustees, directors or officers who have considered the risk may feel they are covered by a clause in the trust deed or constitution that indemnifies them from consequences of actions undertaken in their roles. But there may be no funds available if they ever needed to call on this safeguard. This is protection in name rather than substance.

Clearly, there is the need for a dependable backstop to protect trustees and officers from the consequences of financial misfortune on their watch.

The simple solution

At Glenn Stone Insurance we recommend Trustee Liability Insurance to all those exposed to the risk. This is similar to the Director and Officer Liability cover provided to people in limited liability enterprises.

If a claimable event arises, these policies can step in to fund your defence and cover any damages. The amount, details and exclusions will be negotiated but the core principle is to shield your personal assets from the consequences of a problem with the trust.

And here’s what makes the policy an absolute no-brainer – the trust pays for it!

By now it should be clear that ignorance is far from bliss. If you have a nagging suspicion that these matters aren’t completely covered, we recommend a review of your organisation’s policies. This is something that Glenn Stone Insurance provides to all its customers.

For a no-obligation review of trustee liability, call us on (09) 826 0053 or email us today.

Case Study:
Negotiating $196,000 extra
for a client’s payout

The issue

A medium-sized commercial property owner was embroiled in a claim with its insurance company. Through no fault of his own, the property owner had become the victim of an illegal P lab in one of his units. The damage was considerable and an insurance claim for damages had been lodged.

The claim was being managed by another broker – and it was going nowhere. Five long months had passed without a settlement offer. To add insult to injury, the insurer did not want to renew cover, leaving the property owner exposed to further risk.

The result

Glenn Stone Insurance was appointed as broker and immediately took over the outstanding claim. The first issue was to negotiate cover elsewhere, which was completed without a hitch. That was one monkey off the client’s back.

We then picked up the moribund claim. The previous broker had lacked the expertise or motivation to negotiate effectively with the insurer, so we immediately went in to bat. Six months later, after much negotiation, the insurer finally put an offer on the table for $322,815. However, this came with many strings attached and was not an adequate offer in our opinion.

Our claims team returned to the negotiating table and eventually came back with an offer of $518,328. This was accepted.

Do you need a claims champion on your team?

We are always happy to give advice on policies and help clients troubleshoot their problems. Call us on (09) 826 0053 or email us today.

“The insurance market is
changing at a rate of knots…”

Glenn Stone - Director

How did you first get into insurance broking?

I was working for an insurance company and achieving good results, but when I looked at the potential career path, the short-term outlook was bigger numbers but much the same job. It was just not challenging enough from a technical insurance point of view, which is my passion.

Insurance broking is the exact opposite. You really need to know, not only your product but also the insurance policies of every insurance company you deal with, and the way they interpret those policies. It can be an absolute minefield.

What do you find most satisfying about your job?

Seeing claims get paid and clients who are happy with the results we achieve. It’s the ultimate test of the advice we provide and the insurance we facilitate.

If you had to give just one piece of advice, what would that be?

Always read your insurance documentation including the policy wording. If you have any questions at all – give us a call. We’re the professionals, and we can translate legalese into everyday language.

What’s the biggest change you’ve seen over the last few years in the insurance business?

The loss of skills within some of the large insurance companies. Many of the employees dealing with policies don’t have a detailed understanding of the cover they’re providing. This leads to some interesting discussions at claim time!

Anything on the horizon that insurance buyers should be aware of?

The insurance market is changing at a rate of knots that is almost impossible to keep up with. Premium increases, changes in coverage, excesses, what insurers will and will not insure. The best advice I can give is to find yourself a broker who is proactive and not reactive.

What are your hobbies and interests outside work?

Off-road running with my mates. We all enjoy getting out in the bush and slogging it out for fun. It’s hard work some days but it’s also very satisfying. Kayaking is a developing passion and if I can couple this with fishing I will consider myself to have kicked the goal.

With a young family, finding the time is not always easy. However I have a lovely supportive wife and two lovely kids that I like hanging out with too. It’s all about finding balance.

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Copyright © 2012 Glenn Stone Insurance Ltd. All Rights Reserved.

Contact Details

Level 1, 41 Totara Ave
PO Box 15854, New Lynn
Waitakere 0640, New Zealand
Tel: +64 9 826 0053
Fax: +64 9 826 0683
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