Thanks to our Partner Plus members Hayes Parsons for the following blog.
The heritage sector has many things to celebrate and shout about in 2023, and most of us like to deal with positive news and updates. But it is a sad fact that right now there are real challenges for many heritage centres. For some the issues centre around finance. For others it is visitor numbers slipping, or the need for new investment to freshen things up. And further still others face a shortage of staff, volunteers and sometimes trustees. These facts often lead to mergers or closures, so we will address each issue separately, but note quite a few common themes along the way.
When two or more organisations merge, it is worth asking whether there is in fact just one entity that is taking over the other organisations, or whether all of the entities merging will in some sense cease completely allowing for a brand new organisation to emerge.
Either way, the commercial insurances in place for all the organisations concerned will need to be looked at carefully. Any organisation planning to merge with another may well be tempted to cancel insurances down quickly. That should be cautioned against in the short term in case legally the organisation exists for a further period of time, and remains liable for any activities, continues to own property or assets, or where staff remain employed by the organisation in question until a future date.
Of course, once staff and activities can be covered by another organisation’s insurance policy, then that is the time to cancel down old insurances and potentially receive some refund. This message comes with one important caveat, namely Trustee and Officer Liability insurances. It is possible to purchase what is called “run-off cover for a number of years to protect claims that may arise in years to come, where people claim against a former trustee or officer. This cover is essential and should be purchased before any main insurance policy has been cancelled down.
Similarly, before any insurance is cancelled, if you have Legal Expenses or Employment Practises cover in place, ensure you maximise the advice and cover afforded if you plan to make any staff redundant or have a major shake-up of roles going forwards. These discussions with insurers need to happen before any staff are employed by the new organisation.
And we must not forget the new organisation (or the remaining organisation) after the mergers have taken place. That new organisation needs to make a full disclosure of what new activities it undertakes, what it owns, and make sure the business description (a technical insurance term) on the policy schedule is accurate going forwards.
Turning now to heritage closures, there are two types: temporary and permanent. Temporary closures are in one sense easier, though things like un-used heritage buildings or spaces need to be declared so that insurers can advise on what needs to be done to protect property. Likewise, there will be questions around where collections or contents are stored, and what security and checks are in place. Revised income and wage roll figures will need to be declared.
If the heritage building closure is permanent then all of the earlier points under “Mergers” about Legal Expenses and Employment Practises covers are very relevant, as well as the need to purchase the run off cover for Trustees and Officers, before any main heritage policies are finally cancelled. And the disposal of property and collections should also be done before any insurances are cancelled.
Hayes Parsons Insurance Brokers
Hayes Parsons has many years of experience in sourcing bespoke insurance cover for the heritage sector. We understand that landscape is challenging for many heritage buildings right now and the issues noted in this article are just some of the hurdles that heritage buildings have to jump to ensure they deal carefully with mergers or closures. Visit the Hayes Parsons website.