It is essential for a nonprofit organization to understand that their board of directors are at risk of the same management liability issues as for-profit organizations. As a matter of fact, over 90% of claims that nonprofit organizations are faced with are related to employment practices. Many organizations however, fail to take this idea into account when purchasing insurance. This then leads to disaster as nonprofits are not adequately covered for employment liability issues.
The most frequent misunderstanding among nonprofit organizations is that immunity laws protect the organization and its volunteers. In actuality, the state and federal laws only limit personal and individual liability in certain situations. This immunity does not however protect the organization itself. In the unfortunate event of a lawsuit, a nonprofit organization’s operating budget can take a devastating hit. In addition, individuals such as directors, employees, and officers who are compensated by the organization do not receive protection from immunity laws.
Volunteers should also be wary of the fact that more and more states now are holding individuals personally liable for the board’s actions. Nowadays it is necessary for all members of the board to give a defense in court if named in a lawsuit. This was recently exemplified in a case where the IRS found an executive director personally liable for the embezzlement of funds and the failure to pay federal taxes, a crime committed by a former bookkeeper.
No matter what, as long as a nonprofit organization interacts with individuals whether it be, customers, employees, board members, or volunteers, that company is at risk for employment practices liability issues. It is especially essential for a company to have coverage for issues such as wrongful termination, discrimination accusations, and harassment because these common claims can be very financially devastating to a nonprofit when not properly covered by insurance.
Here at Kirkwood Insurance, our Directors and Officers Employment Liability coverage for nonprofit organizations is very affordable and provides coverage for the potentially damaging claims mentioned previously. We cover many different types of organizations such as,
- Country Clubs
- Environmental groups
- Humane Society
- Youth Sports Associations
- Historical Society or Preservation
- Social Service Organizations
- Economic Development Corporation
- Chambers of Commerce
- Membership Organizations
The purpose of a nonprofit organization is to make a difference and generate positive change in the world. Protect your organization and its mission by getting adequate coverage through our Directors and Officers Employment Liability coverage for nonprofit organizations.