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Liabilities for the Board ...
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(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)
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Adviser a publication of LeadingAge New York | Summer 2018