Legal Protections & Insurance

Topic 1: Mitigating Liability in Nonprofits

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Organizational Structure for Liability Protection

A foundational step in reducing liability for individuals working or volunteering at a nonprofit is structuring the organization as a corporation. This strategic move provides essential protection, particularly for board members, shielding them from potential judgments or debts.

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Safeguarding Through Policies and Documentation

Every nonprofit should create an employee handbook that meticulously documents policies related to sexual harassment, discrimination, termination, and more. This comprehensive handbook serves as a safeguard against potential lawsuits and legal issues.

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Fairness and Integrity in Practice

Adhering to the policies outlined in the employee handbook, whether for minor matters like vacation requests or more complex issues such as employee terminations, not only shields the organization from legal troubles but also demonstrates a commitment to fairness and integrity in its dealings with employees.

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Ensuring Workplace Safety

Injuries occurring on the job are typically covered by workers’ compensation insurance. Depending on your state's regulations, additional assistance may be provided by the state. Compliance with these programs is often a legal requirement for most organizations.

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Topic 2: Responsibilities and Accountability

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Liability Protection for Board Members

Board members generally enjoy protection from the nonprofit's financial debt or legal issues when they fulfill their duties to the organization. This protection hinges on staying informed by attending meetings, reviewing board materials, and proactively seeking clarity when concerns arise.

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Oversight and Accountability

The board's responsibility includes holding the nonprofit's leadership accountable for effective governance, proper record-keeping, and timely submission of all government-related paperwork. Knowledge of workplace laws and state/federal requirements is essential, best achieved through the establishment of policies and procedures that employees are trained on and expected to follow.

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Topic 3: Comprehensive Insurance Coverage

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General Liability and Employment Practices

Nonprofits should secure a general liability policy to protect against claims from non-employees who may get injured while on the organization's property and seek damages. However, it's important to note that employment-related lawsuits, such as those related to sexual harassment or wrongful termination, are not covered by general liability policies but require specific employment practices insurance.

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Property Insurance

Property insurance provides coverage for the nonprofit's physical assets, including buildings, fixtures, computers, and inventory.

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Auto Insurance

Auto insurance is crucial when employees or volunteers use the organization's vehicles or their own for nonprofit-related activities. Insurance should cover both the vehicle and liability for injuries to other persons or their vehicles caused by the driver.

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Directors' and Officers' Insurance

This insurance is essential for covering lawsuits related to fraud or financial issues that specifically name the nonprofit's directors or officers. It provides a layer of protection for those in leadership roles within the organization.