Protecting Yourself While Serving on a Nonprofit Board

Protecting Yourself While Serving on a Nonprofit Board

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So, you’ve been invited to serve on a local charity board. Or you’re thinking about running for your school board. Serving on a nonprofit board is a great way to give back and make new connections by sharing your professional skills with the community. Consider your vulnerabilities, too. Boards and board members do get sued. And you can take steps to protect your family’s assets before that happens.

Be aware of your duties

Board members make decisions that can have far-reaching effects. They have fiduciary responsibilities and are held accountable for the organization’s activities. Nonprofit board members generally have three areas of duty:

Duty of care: adherence to a standard of reasonable care while performing any acts that could foreseeably harm others. This is the first element that must be established to proceed with an action in negligence.

Duty of loyalty: the principle that directors and officers, in their capacities as corporate fiduciaries, must act without personal economic conflict.

Duty of obedience: making sure the nonprofit is abiding by all applicable laws and regulations and doesn’t engage in illegal or unauthorized activities.

In addition to these standard duties, you should get a job description from the nonprofit outlining what you’re personally accountable for. And make sure to stay engaged – attending meetings, thoughtfully reviewing materials and voting intelligently. You may even have to advocate for transparency to ensure you’re able to carry out your duties.

Consider the risks

Even if you perform your duties completely and ethically, you can inadvertently expose yourself to tremendous risk. Board members are often among the first people employees, patrons, vendors and constituents target when they feel they’ve been wronged.

Take the homeowners association, for example. A resident slips and falls near the pool and blames the HOA for failing to ensure the area has a safe surface. He then sues the board members who voted against the safety measures.

Here are some other common areas of exposure:

  • Libelous speech – often via social media
  • Tax reporting errors, such as failure to file IRS form 990 in a timely way
  • Copyright and trademark violations
  • Sexual harassment
  • Discrimination
  • Breaches of contract
  • Lack of synchronicity between board policy and practice
  • Failure to manage conflicts of interest

Protect yourself

In addition to vigilance in carrying out your nonprofit board member duties, you’ll want to make sure you have insurance in place to manage your risk.

  • D&O policy: Larger nonprofits may have a Directors and Officers policy that covers you. Ask about it!
  • The Volunteer Protection Act: This federal act aims to promote volunteerism by limiting, and in many cases eliminating, a volunteer’s risk of tort liability when acting for nonprofit organizations or government entities. Keep in mind, however, that it only applies if the nonprofit is an official 501(c)(3). It also will not protect you from actions based on your willful, criminal, negligent or reckless conduct.
  • An umbrella insurance policy: You may think you don’t need one or that the price is out of your reach, but that may not be the case. You can get $1 million or $2 million in umbrella coverage for as little as a few hundred dollars a year. Costs depend on the amount of coverage chosen, along with the number of assets you have. Your risk profile, credit score and location also affect the cost.

In addition to partnering with companies and nonprofits, The Miller Group works with individuals on personal coverage. We’ll be happy to review your current policies to ensure you have the individual coverage you need.

 

Sarah Askren, Private Risk Management Business Development Manager, The Miller Group

See also:
6 New Year’s Resolutions For Your Nonprofit
Child Welfare Organizations And Risk Management: Include Technology In Policies To Protect Children
Child Welfare Organizations: Are You Prepared?

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