Personal Insurance Coverage - Volunteering for Nonprofit Organizations

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  Question:

A fellow board member on our local nonprofit organization told board members and other volunteers that they don’t need to buy any special liability insurance, because their homeowners policies will cover them. Is this correct?volunteer group hands together

Answer:

That’s an excellent question, and it’s a question that our customers ask frequently.

Serving on the board of directors or as an officer or a volunteer for a non-profit organization is as American as apple pie. With that service, however, there come a few risks.

Directors and officers of non-profit organizations, either individually or collectively, are exposed to claims that they harmed the organization or someone else in the course of managing the organization's financial affairs and establishing policies. For example, a member of or a contributor to the organization may allege financial loss as a result of a director's or officer's breach of the duty of care or loyalty to the organization.

In addition, individual directors, officers and volunteers may be liable for bodily injury, personal injury or property damage caused to third parties while performing duties for the organization, or for their vicarious liability in directing employees or others should an accident occur during the course of their activities.

Texas law provides for immunity and indemnity limitations for volunteers working for charitable and non-profit organizations. It is clear, however, that these laws do not eliminate the need for appropriate liability insurance with adequate limits for the individuals who perform services for these organizations.

The liability coverage on your homeowners policy covers legal damages arising out of bodily injury or property damage you cause to others during personal activities that don’t involve your business or occupation. Bodily injury is defined as bodily harm, sickness or disease. Other types of personal injury claims that can arise from activities with a non-profit organization, including libel, slander, invasion of privacy, and malicious prosecution, can be covered for a small additional premium. Ask your agent to be sure you have the right coverage for injuries or damage you may cause while working for a nonprofit organization. Depending on the type of organization you are serving, he or she may recommend a “business pursuits” endorsement on your homeowners policy just to be sure, as well as a personal umbrella policy for added protection and higher limits of liability.

Despite the broad protection available on your homeowners policy, there is no coverage for the typical types of lawsuits filed against directors and officers of nonprofit organizations – those involving management of the organization's financial affairs and establishment of policies and procedures. The best protection for these types of lawsuits is a special liability insurance policy designed to cover such lawsuits. These policies are sold under a variety of names and are readily available and reasonably priced for most non-profit organizations.

Bottom Line: Don’t be misled about the limited liability protection available on homeowners and personal umbrella policies, nor about the immunities and limitations provided by Texas laws, for directors, officers and volunteers of nonprofit organizations. The leaders of such organizations should be encouraged to purchase liability insurance for the organization and for the directors and officers — as much as the organization can afford. Commercial general liability, auto liability, workers' compensation, umbrella and special liability policies are all needed if the organization wants to attract qualified volunteers to direct the organization's activities (in the short term) and assure the organization's survival (in the long term). 

Swingle, Collins & Associates specializes in personal insurance coverage. The descriptions of coverages listed on this website are brief and subject to the provisions, limitations, and exclusions that can only be expressed in your policy and related endorsements. For additional information of how Swingle, Collins & Associates can assist in meeting your coverage needs for personal insurance please contact your dedicated risk manager to discuss the benefits and services of insurance coverage.

The information contained on this page is provided for informational and educational purposes only. It contains general information on insurance issues and may not reflect the most current developments in insurance coverage and is unlikely to apply in all factual scenarios. The information does not include all the terms, coverages, exclusions, limitations or conditions that may be contained in the actual insurance contract language. The policies themselves must be read for those details. Sample policy forms will be made available upon reasonable request.