Do you serve as a voluntary board member, offering your time and expertise in support of a not-for-profit organization? If so, volunteer beware. Volunteer board members can be held liable for the actions or inactions of the not-for-profit organization. Make sure you protect yourself from this risk by seeking adequate protection and insurance coverage.

In an increasingly litigious environment, even nonprofits are at risk. Just as for-profit, public corporations invest in Directors and Officers (D&O) liability insurance to protect executives from being sued for activities conducted in their roles, private and not-for-profit organizations must also take preventive steps.

Clearly, voluntary board members need to tread carefully when entering the nonprofit world. Here are a few points to keep in mind before you join a board of directors:

The organization's coverage may not be enough 

  • While the organization may carry insurance to protect itself, a limited budget may result in the wrong coverage limits. Before you agree to join a board, make sure you receive a certificate of insurance from the nonprofit and review the coverage and the by-laws.
  • A nonprofit that has been incorporated can protect directors, members and officers from liability. If you join an organization that is unincorporated or are unsure about its level of coverage, you may need to seek an additional policy. Your personal insurance is typically not enough to shield you from executive risks.

Cutting staff can lead to litigation 

  • When nonprofits are forced to trim paid staff, the risk of wrongful termination and other wrongful-employment-act lawsuits can also arise.

Certain policies can help protect nonprofit leaders

  • Not-for-profit directors & officers insurance can insulate you against some of the more common types of suits filed against nonprofit organizations.

When selecting a policy, be sure to focus on details such as who falls under the umbrella of insured "subsidiary." If only the "Named Corporation" or "Corporate Entities" are included in this description, it's unlikely that individuals will be included in the coverage. Seek out language like "any organization" or "any entity" instead.

High-net-worth individuals and others who choose to volunteer their time and talents to nonprofit boards can be doing a great service to their communities or a particular cause. However, they could be doing themselves a disservice if they fail to adequately protect themselves from risk of litigation. If you are considering getting involved with a nonprofit organization, be sure to discuss the decision with a HUB consultant, who may be able to help you identify and steer clear of potential pitfalls.