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One of the most common questions I'm asked by a parent group mom or dad is, "Can I/we be sued for that?" The answer that no one wants to hear is – anyone can sue anyone for anything at anytime undefined and someone will! A standard tactic in many lawsuits is to name all possible individuals and organizations that may possibly be liable. It is up to the defendants to argue to the court why they should not be included in the lawsuit and dismissed from the case. Just getting dismissed can be costly. It cost one of my clients $70,000 to convince the court it should not be a defendant.
Therefore it is important that all nonprofit groups consider the potential risks and take steps to avoid, limit, transfer and protect against such risks.
Based on a quick review of lawsuits involving nonprofit organizations it appears that three of the most common risks for these groups are: torts (injuries to persons); officer and director liability for failure to carry-out their legal and fiduciary duties; and "negligent hiring" of either paid staff or volunteers who are later found not to be qualified or who have backgrounds (i.e. criminal convictions, etc.) that make them greater risks for the positions in which they are placed. Many nonprofit organizations under the mistaken assumption that state and federal laws, referred to as charitable immunity or "good Samaritan" laws and "volunteer protection" statutes, provide adequate protection to individuals who volunteer their time on behalf of nonprofit charitable and educational organizations. While laws exist that provide liability protection in certain circumstances, these laws should not be relied upon to provide adequate protection for nonprofit groups and their volunteers in all, or even most, circumstances.
Some states have charitable immunity or "good Samaritan" laws that protect certain volunteers in particular circumstances. Many of these laws, however, are limited to providing exemption from liability to people who in good faith render medical care to ill or injured persons. The laws often do not protect volunteers who are engaged in other activities on behalf of a nonprofit group. In addition, as the nonprofit sector of the U.S. economy has grown and matured, these types of charitable immunity statutes are becoming more restrictive and giving way to the theory of respondeat superior – meaning the superior or employer (nonprofit) should control and be liable for the acts of its employees/volunteers. Therefore while charitable immunity may exist is certain situations in certain states, it should not be relied upon.
It took nearly ten years of steady lobbying before the federal Volunteer Protection Act of 1997 was enacted. While this law provides some protection to volunteers, it has numerous exceptions and limitations. For example, the Act does not protect volunteers if their acts or omissions result from:
In addition the Act does not cover:
And finally, States may further limit the applicability of the Act preempting their State from the federal law and enacting a state law which may:
Because state and federal laws can not be relied upon alone to protect nonprofit groups and their staff and volunteers from liability, it is recommended that all nonprofits develop a risk management system to manage the risks. A basic risk management system can be developed following three simple steps:
Development of the plan can be as simple as forming a committee to meet and brainstorm to identify the most probably risks for the organization, assess the risks and provide recommendations to the full board for adopting an action plan. Often the assistance of a professional with knowledge of common risk factors for nonprofits is employed to facilitate the development of a risk management plan. A facilitator can often assist the organization to better identify the most likely risks and should be able to provide suggestions for better controlling the risks, including developing appropriate policies, consent documents and contractual arrangements.
Carrying appropriate insurance is one way to control risks. There are four basic types of insurance nonprofit organizations typically carry: general liability – to cover accidents and injuries to individuals; directors and officers – to cover the personal liability of officers and directors for their legal responsibilities serving the organization; property – to cover loss of property/assets of the organization, such as damage to facilities, owned and rented equipment, and property/inventory related to fundraising programs (the wrapping paper, candy or other products that the parent group receives before they are distributed and funds collected); and, bonding – to cover loss of funds of the organization to embezzlement and the like. While state and federal laws can not be relied upon to provide all necessary risk protection to nonprofits, with appropriate planning and management of the risks parent groups should be able to conduct their programs and have peace of mind.