How Legal Issues Affect Nonprofit Directors

Posted on: December 22, 2014 by Care Providers Insurance

How Legal Issues Affect Nonprofit Directors and OfficersHow Legal Issues Affect Nonprofit Directors and Officers

Last month, we noted how one of the most common insurance misconceptions your nonprofit clients have is that executive liability insurance for non profit organizations is unnecessary. Quite the contrary; nonprofit organizations are even more vulnerable to personal liability claims than their for-profit counterparts are, especially since they typically lack the funds to defend against and pay damages for a legal claim.

One of the most common questions that Nonprofit Directors and Officers have is, “Should I really worry about personal liability?” Over the years there have been a wide range of possible lawsuits against businesses. But what’s more, is oftentimes the plaintiffs in cases hold directors or officers personally liable, in addition to holding the business liable. Lawsuits could arise as a result of a disgruntled employee claiming wrongful termination, an unhappy vendor claiming breach of contract, or even a visitor who was injured on your client’s property.

It’s important for your clients to be aware of what exactly would constitute as a claim in which they could be held personally liable. If someone claims they personally and directly injured them, for example, they may be sued. Other lawsuits can stem from a claim that the nonprofit director or officer:

  • Personally guaranteed a financial transaction on which the company defaults
  • Failed to ensure that the nonprofit deposits taxes or files necessary tax returns.
  • Did something intentionally fraudulent or illegal that caused harm.
  • Used nonprofit funds for personal endeavors.

These are just a few examples of how or why a nonprofit director and officer could face a lawsuit. Even if the claim is unfounded, the lawsuit itself could cost thousands to defend, which could be detrimental to your Nonprofit client.

Understanding why Care Providers Insurance Programs are important for nonprofit organizations is essential for your clients, as well as for you. At Care Providers, we are committed to helping you place various coverages, including employment practices liability and more, for your nonprofit clients. Our mission is to provide coverages tailored to meet the unique needs of this market segment. Please contact us today to learn more at 1-800-970-9978.

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