The uncertainty as to the ability of charitable institutions to purchase liability insurance for its directors and officers, as of right, has now been removed. 

A recently enacted regulation under Ontario’s “Charities Accounting Act” now permits directors of Ontario charities to be indemnified and allows the purchase of liability insurance. 

This regulation however imposes conditions on the charitable institution prior to granting an indemnity or purchasing insurance. 

Consideration must be given to:

• the degree of risk exposure

• whether the risk can be minimized without approving indemnification or the purchase of insurance

• whether the cost of insurance is reasonable in relation to the risk and the solvency of the institution

• whether the management of the charity’s property is advanced by granting indemnification or by purchasing insurance.

SUMMATION

Consider the impact of this regulation.  Review your current policies of indemnification and the purchase of insurance.  Determine if your by-laws meet your requirements.

If approving insurance and/or indemnification ensure that the resolution approved by your Board of Directors at the very minimum sets out that these regulatory requirements were duly considered.  A written report setting out how these considerations were dealt with and providing recommendations with respect to the purchase of insurance and/or indemnification, submitted to the Board of Directors for approval by the Board of Directors is the preferred manner of dealing with this matter.

If you require assistance, we will be pleased to assist you.

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