Serving on a non-profit board is a great way for you to give back and support a good cause. When you serve on a non-profit board, you become an integral part of helping your community. Serving also expands your skill set, helping you grow both professionally and personally. There’s also great pride in helping shape the non-profit organization’s vision and help it reach its full potential.
However, you probably weren’t initially thinking about your liability exposure and how, as a board member, you’re exposed to quite the variety of potential lawsuits.
Non-profits can sue Employees, competitors, vendors, and even donors. Many of the claims made against non-profits deal with harassment, discrimination, wrongful termination and other employment practices. As a board member, your decisions may be challenged, exposing you and your assets.
As a volunteer board member of a non-profit organization, you can be held personally liable for the actions and decisions of the organization. You need to be insured adequately as your future income may be at risk.
Limiting Liability as a Board Member
To limit liability exposure, you need to take proactive steps. Make sure you have thoroughly studied your duties as a board member and adhere to them. Understand the laws governing non-profit organizations in your province. If you are aware of any conflicts of interest, disclose them before accepting the position. Ask if Directors and Officers (D&O) liability is provided. If not, get a policy.
However, whether or not a D&O policy is in place, it would still be wise to look to your umbrella policy for protection. The problem with D&O is that you share the coverage limit with the rest of the board members. Remember that many non-profit organizations have tight budgets. So, if the non-profit organization’s limit is $1 million and there are 15 of you, there may not be sufficient protection for all of you.
Ask your insurance broker if Non-Profit Board Member Protection is an available option to add to your Personal Umbrella Liability and protect yourself from liability lawsuits that could potentially deplete both your net worth and future income.
Your umbrella policies will typically only cover you for property damage or bodily injury that arise from your activities as a board member. They will not protect you from your alleged poor decisions such as discrimination, termination, conflict of interest, breach of duty, mismanagement of funds, wrongful termination, and so on.
If Non-Profit Board Member Protection is not an available option, ask your insurer about adding D&O coverage to your umbrella policy. It won’t always be possible, depending on your insurance carrier. If not, ask your broker about what options are best for you, so you can continue serving as a board member with peace of mind that you have protected assets.