By the Government’s own admission, a CIC is a particular type of Limited Company, and as such, it requires a specialist approach when it comes to insurance.
Following their introduction in 2005, Community Interest Companies (CICs) have been an enormous success in providing Social Enterprises with a quick, easy and cost-effective way to set up a business.
If you are setting up a CIC, it is essential to get the right cover, but first of all, you need to understand the different options available.
Can’t a CIC Purchase A Normal Commercial Insurance Policy?
Absolutely, insurers will generally recognise a CIC as a Commercial entity and provide coverage under a typical business insurance policy.
However, such policies do not always recognise the specialist nature of a Social Enterprise operation.
They can often miss critical elements of cover (for example, Employers’ Liability for volunteers or Public Liability for fundraising events).
Public Liability Insurance
The diverse nature of CICs means that Public Liability Insurance requirements will vary from one company to the next, but in general terms, most firms will need some form of cover.
Public Liability Insurance provides protection for the company’s legal liabilities should a member of the public (or client) suffer injury or damage to property as a result of the actions of you (or one of your employees) while carrying out your business activities.
Examples could include:
- A member of the Public slipping or tripping on a wet floor at your premises and breaking an arm
- A stall collapsing on an attendee at a fundraising event
- Someone falling over your laptop cable and twisting an ankle during a presentation
CIC Insurance policies will generally extend to provide Public Liability for events, conferences or exhibitions within their standard policy cover.
Still, we recommend you check the details and your requirements carefully with your Insurance Advisor.
Employers Liability Insurance
If a CIC has any employees, it is legally required to arrange Employers Liability Insurance, which provides protection for your legal liability against claims by employees following injury or illness for which they deem you responsible.
This is a particularly important area for CICs who utilise the generous services of volunteers as your duty of care remains the same whether they are being paid or not, as they are deemed to be acting under your instruction.
Examples of Employers Liability incidents could include:
- An employee falling from a ladder and breaking an ankle while putting up bunting
- A volunteer injuring their back while lifting equipment and claiming that they did not receive suitable training or supervision
Liability cover and the Law
Under the Employers’ Liability (Compulsory Insurance) Act 1969, any CIC deemed to have employers must purchase Liability Insurance to protect the duty of care it owes to its employees.
Fines of up to £2,500 per day can be granted for breach of the act.
Premises and Equipment
Should your CIC operate from fixed premises, you may need to arrange cover for Buildings, Contents, Fixtures and Fittings, Computer Equipment etc. Portable items such as laptops or tablets can also be covered while away from the premises.
Should you be unfortunate enough to suffer a loss such as a fire or theft claim, you will also incur additional expenses and lost income whilst the CIC is being relocated or premises reinstated.
Business interruption cover is available to provide protection in this regard.
Professional Indemnity Insurance
If your role as a CIC provides professional services or advice such as consultancy, tutoring or counselling, then you should also consider Professional Indemnity Insurance.
PI Cover provides indemnity against claims for professional negligence from a client or recipient of your services (whether paid or not) who has suffered a financial or physical loss.
Management Liability Insurance
As with any regular business, specific risks exist in terms of losses relating to the actions or activities of the management of the Company or Directors.
Directors and Officers cover provides protection against claims of negligence levied against Directors or Officers in the performance of their duties.
This can be a particularly important area for a CIC should someone challenge how funds were being utilised and whether a Director’s actions could be considered in the best interests of the Company’s Social Enterprise ethos.
Other protections under a Management Liability Insurance policy include employment or harassment claims and Legal Expenses Insurance.
More Areas of Cover
Extra potential areas of risk could include:
- Motor (fleets, cars, vans or minibuses)
- Money (covering cash held for businesses activities or events)
- Fidelity Insurance (Theft by employees)
- Travel (Either for Directors and employees or for specific events)