You May be Liable for Your Nonprofit Service

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Many of our clients like to give back to their community by donating their time and money to causes they feel strongly about. This often leads to being asked to serve on the board of directors for a nonprofit organization. A lot of people think there is limited exposure to liability claims when serving on a board. This is simply not the case. They can be sued individually or as a group for actions taken while operating as a member of a nonprofit organization.

An obvious claim against board members can be for mismanagement of the assets or funds of the organization. However, there have also been employment related charges for issues such as wrongful termination, harassment or discrimination. These claims can be significant.

Most nonprofit boards carry a small directors and officers (D&O) liability policy that provides some coverage. If you are asked to serve as a director, it is important to determine the limits of this coverage. Board members often make complex and difficult decisions for the nonprofit organizations they serve. Most of these policies would not be adequate if you were sued individually. We recommend clients take out excess D&O coverage to protect their personal assets should they ever be sued individually for actions taken while performing board services.

Your financial adviser should be able to help you evaluate your situation and determine if an excess D&O policy is advisable. Standard market insurance carriers often do not have the ability to address this issue. An adviser can help you find the specialty carriers that provide this important coverage. Your community needs your talents and you should feel free to serve without worry.

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