Ask most charity trustees whether they could personally lose money if their organisation is sued, and the answer is usually: "We're a charity — that can't happen to us." Unfortunately, it can. And it does.
The Myth of Charitable Protection
Charitable registration with Charities Services (charities.govt.nz) provides tax benefits and public credibility. It does not provide personal liability protection to individual trustees, board members, or committee members. That protection requires something else: insurance.
Under New Zealand law, trustees of incorporated and unincorporated charitable organisations can face personal liability for:
- Governance decisions that lead to financial loss
- Employment disputes — including personal grievance claims against the organisation
- Health and safety failures under the Health and Safety at Work Act 2015
- Privacy breaches under the Privacy Act 2020
- Regulatory investigations by Charities Services for compliance failures
- Wrongful acts alleged by beneficiaries, donors, or third parties
The Incorporated Societies Act 2022 Changed Things
The Incorporated Societies Act 2022 — which came into full effect in 2023 — introduced significantly stronger duties for officers of incorporated societies (which includes many charities, sports clubs, and community organisations). Officers now have explicit duty-of-care obligations, and personal liability for breaches is expressly contemplated in the legislation.
This is a material change. Any incorporated society that hasn't reviewed its D&O/Trustee Liability cover since 2022 should do so promptly.
What Is Trustee Liability Insurance?
Trustee Liability insurance (also called Directors & Officers or D&O insurance in the commercial sector) protects individual trustees, board members, and committee members from personal financial loss arising from claims made against them in their governance roles. It covers:
- Legal defence costs (which can run to tens of thousands of dollars even where no wrongdoing occurred)
- Damages awarded against the individual
- Investigation costs from regulatory enquiries
- Settlement costs
Real-World Scenarios
Scenario 1 — Employment dispute: A charity employs five paid staff. One is made redundant during a restructure. The employee files a personal grievance claim against both the organisation and the board chair personally, alleging procedural unfairness. Without Trustee Liability cover, the board chair funds their own legal defence.
Scenario 2 — Grant mismanagement: A community trust receives a $300,000 government grant. Due to inadequate controls, a portion is misapplied to non-approved activities. Charities Services investigates and the funder seeks recovery. The trustees are named personally in the recovery action.
Scenario 3 — H&S prosecution: A volunteer is seriously injured at a community event. Worksafe investigates and determines the organisation failed to adequately manage health and safety risks. The trustees are named in the prosecution alongside the organisation.
The Cost of Cover vs. the Cost of Not Having It
Trustee Liability insurance for a small to mid-sized charity typically costs between $800 and $3,000 per year depending on the organisation's size, activities, and revenue. The cost of an uninsured legal defence? Typically $20,000–$80,000 before a case gets anywhere near a hearing.
What to Do Next
Talk to a specialist charity insurance broker. They can review your current cover, identify gaps, and structure Trustee Liability insurance that fits your organisation's size and risk profile. If you're not sure whether your current policy includes D&O or Trustee Liability — check now, not when you need it.
About the Author
The CharityInsurance Crew — the CharityInsurance crew are your friendly insurance geeks on a mission to make specialist cover simple and accessible for every NZ charity, sports club, and community organisation.