Peter Collins, Director at LFC explains how “death and disgrace” insurance could protect charities from the actions of their patrons.
Celebrity and scandal have long been close bedfellows, but in recent years the sight of the rich and famous falling from grace seems to be more and more commonplace. From Rolf Harris to Tiger Woods, media exposés can lead to sudden and wholesale reassessment of a celebrity’s character.
The welfare of those involved in such situations is of course the first concern, but there are also ramifications for organisations that work with those celebrities. From companies that have paid public figures to endorse their product, to charities that have secured a well-known patron to promote their work, all are at risk of being caught in the reflection of bad publicity.
A case of bad PR
Recent cases have illustrated how commercial value can be damaged by celebrity transgressions. Following the Rolf Harris revelations, the value of his paintings reportedly plunged, with some experts estimating they could now fetch just 10% of their previous value at an auction. Meanwhile, Tiger Woods’ infidelities are estimated to have cost corporate partners such as Nike and Electronic Arts up to $12bn in shareholder value.
In the corporate world, there is a growing awareness of these risks. As a result, companies are increasingly buying “death and disgrace” insurance to protect themselves from the bad publicity that their celebrity endorsers might bring, and also from the disruption that would be caused by their untimely death.
Why invest in “death and disgrace” insurance?
This is not a new class of insurance – it has been around for decades – but it has rarely been used until recently. Now companies are looking to address not only the loss of income that could occur but also the increased expenditure that might be needed to minimise any brand damage. So what about charities – why are they not following suit? The impact that a celebrity transgression or the death of a patron could have on their income could in the worst-case scenario lead to their closure. At the very least, they may face increased expenditure if they have to employ a PR agency to restrict the damage.
In these situations, it might be difficult to measure to loss of income suffered. However, some charities’ finances are relatively stable and predictable, and here it should be more feasible to estimate the damages.
Importantly, trustees must remember that they have a duty of care to protect the income of their charity. If they do not at least consider such cover via a risk assessment, their actions might be viewed as similar to leaving an asset of the charity uninsured. In this situation, trustees of unincorporated charities could face a personal liability claim in the event of there being a shortfall in the charity’s income.
by Peter Collins, Director at LFC.
Peter Collins is CEO of Legacy Funding Corporation Ltd and is a specialist in designing insurance programmes for organisations operating within the “Not for Profit “sector. He works closely with a number of financial institutions developing products that can generate income for the sector and he also designed the first line slip in the UK for Trustee liability Insurance.
Tel: 08448 480 380 Email: peter@lfcriskandinsurance.com