Non Profit Board Members

Your good intentions can create serious exposures. Serving on the board of a nonprofit organization can be a fulfilling way for you to give back to the community. Yet, in today’s litigious environment, it can also come with substantial personal risk, and the higher your net worth, the more you have to lose.

Most affluent insurance companies provide an enhancement to their Personal Excess Liability Coverage that addresses this risk. By purchasing this nonprofit liability protection coverage you can rest assured your personal assets will be protected in the event of the nonprofit board you participate on if it comes under litigation. Nonprofit liability protection responds in the event that a qualifying organization cannot legally indemnify you due to financial insolvency, or simply lacks the funds to do so.

You May ask:

Why would Nonprofit Board Liability Protection coverage need to be added to a Personal Excess Liability policy?

Personal Excess Liability policies only cover claims due to bodily injury and property damage. Claims associated with litigation resulting from service on the board of a nonprofit organization are financial in nature and may stem from litigation involving wrongful termination, sexual harassment, or discrimination.

Why is Nonprofit Board Liability Protection coverage needed on top of a nonprofit organization’s existing management liability policy?

Nonprofit organizations typically operate on tight budgets and they often carry only the minimum amount of liability insurance. When the limits on the organizations liability insurance are exhausted, board members are personally liable for the judgment amount in excess of the exhausted coverage – putting your personal assets at risk.

What types of litigation are covered with Nonprofit Board Liability Protection?

There are many types of claims brought against nonprofit board members. A few of the common types of litigation that could be covered include:

• Poor management practices
• Discrimination (sex, age, race)
• Wrongful termination
• Harassment
• Misrepresentations
• Libel and slander
• Copyright infringement
• Tax law violations

Nonprofit Board Liability Protection

The policies, not this policy highlights information sheet, form the contract. The policies may contain limits, exclusions and limitations that are not detailed here. These are typical coverage’s, however the contracts do vary.

Coverage Highlights

• Up to $1 million in coverage, policyholder and spouse are protected
• No requirement to schedule the boards and no additional questions or application is needed (depending on provider)
• Opt-in coverage on personal excess liability policy
• Minimal additional cost of $695 (varies by provider)

Covered Losses

• Settlements
• Judgments
• Costs of defense (within limits of the policy)
• 10% of “Excess Benefits” penalty assessed by the Internal Revenue Service per the Taxpayer Bill of Rights Act, 2, 26 U.S.C 4958

Qualifying Organizations

Nonprofit organizations qualifying under Section 501(c) (3), (4) or (7) of the Internal Revenue Code which includes:

• Civic groups
• Country clubs
• Condominium or co-op boards
• Cultural and performing arts institutions
• Religious organizations
• Alumni and Youth associations

Non-qualifying Organizations

• Healthcare Organizations
• Secondary Education Organizations (anything post 12th grade)
• Organizations which have been operating less than 1 year
• Organizations, other than residential co-ops, with total assets greater than $50 million (inclusive of subsidiaries)
• Organizations whose IRS status is pending approval

Contact Tom Torgerson at 858-523-7528 to further discuss your Non Profit Board Liability.

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