Man holding an amusingly small umbrella over a drawing of a man, illustrating insurance coverage

Risks and Insurance

How do we purchase coverage?

Can we be sued?

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 any time, undefined, and someone will! A standard tactic in many lawsuits is to name all possible individuals and organizations that may 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. Getting dismissed by itself 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.

Common Risks

Based on a quick review of lawsuits involving nonprofit organizations, it appears that three of the most common risks for these groups are:

  1. Torts (injuries to persons)
  2. Officer and director liability for failure to carry-out their legal and fiduciary duties
  3. "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.) making them greater risks for the positions in which they are placed

Many nonprofit organizations are 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.

Charitable Immunity Statutes

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—in certain situations in certain states—it should not be relied upon.

Volunteer Protection Act

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:

  • Willful or criminal misconduct
  • Gross negligence
  • Reckless misconduct
  • Conscious, flagrant indifference to the rights or safety of the individual harmed by the volunteer.

In addition the Act does not cover:

  • Volunteers when the harm is caused by the operation of a motor vehicle, vessel, aircraft, or other vehicle for which the state requires an operating license or insurance.
  • Any misconduct that constitutes a crime of violence, a hate crime, a sexual offense, or misconduct for which the volunteer is found to have violated a federal or state civil rights law or where the volunteer was under the influence of intoxicating alcohol or any drug at the time of the misconduct.

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:

  • Provide additional liability protection for volunteers.
  • Opt volunteers in the state out of coverage under the federal law.
  • Require nonprofit organizations to undertaken certain activities like provide training to volunteers and/or carry insurance in order for the protection act to be effective.

Managing the Risks

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. A basic risk management system can be developed following three simple steps:

  1. Identify the risks
    • Review the types of risks your organization may be exposed to
    • Review your premises, your location, your staff and supervision, the types of activities you engage in, and the types of risks to which your staff, volunteers, members, and the public are exposed
    • Review the standard of care expected of your organization
    • If you work with children and youth your standard of care may be higher
    • If you work with experienced volunteers or in an area that people expect expertise, your standard of care may be higher
    • If you work with inexperienced volunteers, and the public is aware of the volunteers' lack of experience, your standard of care may be lower
  2. Assess the risks
    • What risks can your organization tolerate?
    • Which risks can you control?
    • Which risks are too great to bear?
  3. Control the risks
    • Avoid risks that are too great to bear
    • Modify policies, plans and procedures to reduce risks
    • Transfer risks to others via informed consent documents (i.e. "hold harmless" agreements and "permission slips" drafted to withstand legal muster), contractual agreements, and insurance
    • Accept and prepare for the risks
    • Implement a volunteer management program
      • Develop volunteer position descriptions
      • Use and screen volunteer applications
      • Train and supervise volunteers
    • Review and revise your risk management plan regularly

Development of the plan can be as simple as forming a committee to meet and brainstorm to identify the most probable 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 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:

  1. General liability—to cover accidents and injuries to individuals
  2. Directors and officers—to cover the personal liability of officers and directors for their legal responsibilities serving the organization
  3. 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)
  4. Bonding—to cover loss of funds of the organization to embezzlement and the like

While state and federal laws cannot 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.


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