Press Articles - Association Management Liabilities - Association Manager Magazine

The risks of litigation are on the increase. Martin Bell explains why associations need to take the proper precautions.

Trade associations and professional bodies, like other organisations, are exposed to many varied risks. Some are common to all organisations; others are unique to the association sector. Let's take a look at the legal responsibility and potential liability of associations, and focus on the special features of the association profession and their implications.

The association sector is continually evolving to meet the changing demands placed upon it. Over the last few years the legal background in which associations and their directors, officers and managers operate has changed considerably. Many factors have combined to increase the risk of litigation. The legal duties and responsibilities placed upon an organisation and its key employees and officers have steadily grown. The increasing willingness to resolve disagreements via the legal process has led to an increasing number of actions across all professions. Added to this, there are greater demands by consumers in the quality of services expected and a membership seeking

The association is legally responsible for the consequences of errors and omissions in advice provided.

increased value for money. The courts have raised the awards placed upon injury and this has added to the numbers of legal disputes in the UK.

It is useful to consider how liability can attach to trade associations and professional bodies.

Associations possess expert knowledge. This means that the advice provided and publications distributed will be relied upon by members and non-members alike. The law recognises that the possession of specialist knowledge and expertise creates a legal duty. This duty is established whether or not advice is provided for a fee. The association is legally responsible for the consequences of errors and omissions in advice provided. Much of the advice given is factual and carries with it little risk of litigation. However, other advice is judgemental in nature and is open to differences of opinion.

It may be useful to undertake your own risk management audit. To consider who provides advice, in what circumstances and whether there is a quality system in place to monitor and vet the information distributed. Associations communicate also at a national, regional and local level via a network of committees. These do so much good work organising local seminars and distributing information. Many act with a degree of autonomy and are reliant on the time, energy and dedication of a volunteer workforce.

Liability can also arise under the heading of libel and slander. Newsletters, periodicals, web sites, even the minutes of meetings can contain contentious comments. If the reputation of a company or individual is incorrectly tarnished then the association can be held accountable. The wider the circulation the greater the potential problem. The association sector has seen a number of high profile examples of this type of litigation. Again it is advantageous to have a system in place to screen material prior to release. For example, a contentious article may be one casting doubt on the performance specification of a new product.

A dispute may arise from within the membership. An allegation may be made that the association or its officers have acted inappropriately. For example, imprudent use of the association funds, acting beyond the authority given by the body, etc.

If the eligibility criteria for membership aims to maintain and raise standards there is the possibility for dispute if an existing member is no longer able to meet the criteria or a prospective membership barred from membership. It may be argued that their inability to gain membership of an association severely affected their ability to trade within the UK.

The Institute of Director's booklet on personal liability lists 269 individual acts of Parliament which regulate and impose responsibilities.

April 2003 saw a further raft of employment legislation in the UK increasing obligations upon employers. Allegations can include wrongful dismissal, constructive dismissal, unfair selection for redundancy, sex, race or disability discrimination, etc. The duties of care extend even to the interview process.

The Employment Tribunal Service annual report for 2000/2001 shows that over 130,000 applications were made. The number of applications has increased four fold in ten years. The average award has also increased as have the limits of compensation.

Statutory duties contained within the Companies Acts impose further obligations on associations and professional bodies which are incorporated. These also impose obligations upon the officers and directors. An officer can be held responsible for failing to arrange adequate insurance, authorising excessive borrowing, failing to provide proper report and accounts, continuing to operate whilst insolvent and many others too numerous to mention. The Institute of Director's booklet on personal liability lists 269 individual acts of Parliament which regulate and impose responsibilities.

The unique position of associations and professional bodies create special responsibilities and the potential liability for the directors, officers and managers. Associations often have limited resources and therefore do not have the "deep pocket" a potential litigant may seek. As a result the director, officer, council member, etc may represent a more substantial target. Many directors, officers or managers do not realise that they are personally accountable for their actions, errors and omissions and therefore can be held personally liable.

Some directors and officers attempt to circumvent this problem by obtaining an indemnity from the association. This is only as good as the resources of the association. Approximately 15 years ago the first £1,000,000 compensation award was made to the unfortunate victim of a medical accident. It will come as no surprise to learn that the level of award today for a similar injury is approximately ten times that figure.

As directors and officers with responsibility for managing associations unwittingly accept personal responsibility for their actions their personal assets are _ at risk. If insurance cover is affected it should cover

The range of activities undertaken by associations varies considerably. These activities must be carefully considered to assess the risk associated.

not just the association but the directors, officers, council members and volunteers acting on behalf of the association for whom a personal liability may attach. This is especially relevant where the association is unincorporated and therefore personal accountability is automatic.

The range of activities undertaken by associations varies considerably. These activities must be carefully considered to assess the risk associated. Some activities bring additional exposure, e.g. training and/or awarding bodies for example require special attention as do registered charities.

The term director has been used throughout this article. It should be interpreted in its widest possible sense to include any kind of managing officer. Legislation has made the responsibilities of such officials more and more onerous and consideration should be given to managing/insuring some or all of these risks.