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Do you want the short or the long answer?

Posted by Gary Sutherland on Fri, May 20, 2016 @ 09:08 AM

The answer to your question is:  Do you want the short or the long answer?

Often as an insurance agent we are asked technical questions of insurance coverages and the answer can be a quick, short and concise answer or a longer answer based on risk management.

One question asked frequently: My client wants me to be a trustee of their……does my professional liability insurance cover these services?

The short answer is yes the policy provides coverage’s as a trustee except for where you are a beneficiary or distributee of said trust

The long answer requires a number of questions:

  1. Are you the only trustee?
  2. How are you being compensated?
  3. What are your trustee activities?
  4. Is this a new trust or existing trust?
  5. What type of trust?
  6. What are the size and type of assets in the trust?
  7. Are you also providing investment related services?
  8. Are there any complexities of the trust that need special handling?

Based on your answers to the questions above, will generate our longer answer and offer risk management advice based on the insurance policy, its endorsements and trustee claims we have seen over the last 20 years.

For example picking question #2, how are you being compensated?

If your answer is the trust is paying me a stipend of $1,000 as an individual, then in order to make sure your firm insurance policy covers these activities we would want to add you as an additional insured to the existing policy. If the trust fee is paid to the accounting firm then the additional insured is not required. Pro bono work is covered under the policy on a firm basis, the policy states the following:

Pro Bono work, provided that it is performed with your consent and knowledge;

If you, the individual are acting as a trustee on a pro bono basis, then the firm should have this acknowledged in writing and kept with the insurance contract.

One final word of caution, unlike many other accounting activities that have fixed statue of limitations trustee services do not and the start date of the statute of limitation is often the date of discovery or error. About five years ago we dealt with a claim that had trustee services provided in 1984. You can image the difficulty in defending the claim when the original accountant was deceased and records purged.