I was having a conversation with one of my clients about serving on a newly formed non-profit. He was all excited about helping out this wonderful new endeavor. But I told him there are risks involved anytime you try be a good guy. I did some research and found an article I tailored to reflect my views.
Community involvement can be a rewarding experience. It offers a unique opportunity to make a difference in the community where you live and work. Serving on a nonprofit board is just one way to have an impact; however, volunteer service carries some risks. The best way to balance the rewards with the risks is to approach any type of volunteer commitment with the same level of care and research that you would do before taking on a new job.
Before accepting a director or officer position on a nonprofit board, consider the following facts:
- Nonprofit organizations should be run with the same degree of care as for-profit companies. They should have strong financial and internal controls and documented operating procedures.
- All directors of nonprofit and for-profit organizations are subject to basic duties: duty of care and diligence, duty of loyalty, and duty to comply with laws.
- As an officer or director, you could face claims of harm to the organization or to an individual due to mismanagement of the organization’s finances. You could be directly liable for claims for bodily injury, property damage or personal injury related to performance of your duties for the organization or vicariously liable for the acts of staff members.
- Your homeowners insurance may not provide coverage for claims resulting during your tenure serving as an office or director; however, policy endorsements or special liability policies may be available for these circumstances.
- Some states have laws that protect volunteers working for nonprofit organizations from claims, but that is the exception.
So if you are going to volunteer to be on a non-profit board, you need to ask the question: Does the organization have adequate insurance?
Just like for-profit businesses, nonprofits need adequate insurance. Depending on the organization, this can include:
- General liability insurance to protect against classic slip-and-fall scenarios
- Property insurance to protect the nonprofit’s equipment, furniture, and computers from fire, earthquake, theft, etc.
- Commercial auto insurance to cover staff or volunteers who use their own vehicles for the nonprofit’s activities
- Workers’ compensation to cover any injuries to staff
- Professional liability insurance to protect against any claims of mismanagement
- Directors and officers insurance to protect against any claims brought against the board