Taking it personally

3rd March 1995 at 00:00
Anat Arkin on who pays to insure governors against personal liability. Since governing bodies of maintained schools were given a corporate legal identity last year, individual governors have been protected from financial liability for most of their actions as governors.

But while it is usually the school budget which now has to pick up the tab when things go wrong, there are situations where governors can still be held to account as individuals. This makes all the more alarming a suggestion that it is illegal for governing bodies to use school funds either to meet governors' personal liability or to pay for insurance cover against this type of liability.

Writing in the journal Education and the Law, barrister Oliver Hyams argues that it would not be lawful to use funds delegated to a school by its local education authority "for the benefit of the governors, even if the governors incurred personal liability as a result of the spending of those funds". Mr Hyams cites section 58 of the 1986 Education Act, as amended by the 1993 Act, which provides for LEAs to pay travel and subsistence allowances to the governors of any maintained school without a delegated budget. The section goes on to say: "No allowance may be paid to any governorIin respect of the discharge of his functions as a governor, otherwise than under this section. "

Section 36(5B) of the 1988 Education Reform Act (which was inserted by the 1993 Act), gives governing bodies of locally managed schools a similar power to use their delegated budgets to pay governors' travelling and subsistence expenses - but not other costs.

The position of grant-maintained schools seems to be similar. The regulations make no provision for governing bodies of opted-out schools to use their budgets to insure against the potential liability of individual governors.

By contrast, the regulations for FE corporations explicitly allow college governors to insure against personal liability and pay the premiums out of corporation funds. But this does not necessarily mean that those drafting the schools regulations deliberately set out to leave school governors more exposed than college governors. Certainly, Oliver Hyam's interpretation of the law is not the only possible one.

Professor Christopher Arnold, director of professional development with the law firm, Richards Butler, warns against reading too much into the silence of the Education Acts on these questions.

"There is an express power for governors to enter into contracts and insurance is one kind of contract," he says. "There is also an incidental power on the part of the governing body to do what is necessary or expedient in carrying out their functions. So you could argue that if you leave individual governors exposed to personal liability, then you are not enabling the expedient and proper functioning of the school."

Professor Arnold also points out that though governing bodies have not been given an express power to use school funds to protect individual governors from personal liability, the Education Acts do not expressly prohibit this either. The interesting contrast here, he says, is not so much with FE corporations as with National Health Service trusts.

The legislation governing these bodies, which have a similar legal status to GM schools, explicitly prohibits them from taking out insurance for personal liability, at least in the area of negligence. This suggests that if Parliament had wanted to stop school governors from taking out cover against personal liability, it would have said so.

The Department for Education, in fact, appears to encourage governing bodies to take out insurance to protect their members. The department's publication, School Governors: A guide to the law, reminds governors that incorporation does not remove the need for governing bodies to be insured against "all risks", and advises them to check if they need any extra insurance over and above the cover usually arranged by LEAs.

But how likely is it that individual governors would actually be held personally liable and therefore need this kind of cover?

Oliver Hyams says the surcharge regime, which applies to LMS but not GM schools, has not been affected by incorporation. This means the courts can order a governor responsible for any unlawful payment of LEA money to pay it back. A payment would be unlawful if it was for a purpose for which the governing body had no power to spend money delegated by the LEA or if it was incurred through a failure to follow correct procedures. Governors can also be surcharged if they have caused loss to the LEA through "wilful misconduct".

But in practice the chances of governors having to pay for their own mistakes are slim. Under the 1982 Local Government Finance Act they can avoid being surcharged if they are able to satisfy the court that they have acted "reasonably or in the belief that the expenditure was authorised by law". The 1988 Act gives governors of locally managed schools a further defence if they can show that in spending money delegated by their LEA they have acted in good faith.

Individual governors can be held personally responsible in criminal law for breaches of some sections of the 1974 Health and Safety at Work Act and of the Environment Protection Act 1990. But in most situations governors who act reasonably, legally and in good faith will not be held personally to account if their actions as governors backfire.

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