Adviser Vol. 1 | Page 8

This Is COOL Liabilities for the Board ... Insurance Made Simple (Continued from page 5) 3. Duty of Obedience: The individual should try to further the mission of the nonprofit by supporting board decisions and implementing policies as they are outlined. In addition to these responsibilities, board members must also ensure that the non-profit follows all tax requirements, complies with anti-trust laws, abides by civil rights laws and manages funds effectively. Protections Since there are risks involved with being part of a nonprofit board of directors, there are several protections available to minimize personal liability. First, there are federal and state statutes designed to protect individuals acting in good faith. The federal Volunteer Protection Act provides shielding for individuals acting on behalf of an organization within the scope of their position, as long as the actions are not criminal, negligent or reckless. All state volunteer protection statutes must provide at least the amount of protection that the federal law provides. Second, most nonprofit organizations have indemnification provisions in their bylaws. These provisions explain that the organization will cover the legal expenses accrued in the event of a lawsuit. However, if the organization does not have excess funds, it may not be able to support this provision. In Since there are risks involved with being part of a nonprofit addition, if the board member was board of directors, there are several protections available to not acting in good faith, the provision becomes null and void. minimize personal liability. Third, nonprofit organizations should strongly consider purchasing insurance to cover their board members in situations that fall outside of the indemnification provisions or in the event that their financial situation does not allow them to cover extensive legal expenses. Nonprofits should consider the following policies: • Commercial General Liability (CGL): Protects volunteers and employees from bodily injury and personal injury claims. • Automobile Liability: Coverage is needed for volunteers operating vehicles while working on behalf of the organization. • Directors’ and Officers’ Liability (D&O): Protects directors and officers against employees, clients and community members serviced by the organization. Specifically, D&O provides coverage for discrimination, harassment and wrongful termination claims. Provisions within the Americans with Disabilities Act of 1990, the Family and Medical Leave Act of 1993 and the Civil Rights Act of 1991 have led to claims against nonprofit organizations and their respective boards. (See Liabilities for the Board on page 8) 7 Adviser a publication of LeadingAge New York | Summer 2018