June 15, 2018

Non Profit D&O

Private Client

3 min read

When you find yourself with the opportunity to sit on a board for a not for profit organization, it can be a tremendous honor. But, don’t let the honor and challenge cause you to lose sight of the potential risks.

While serving on a board can be a truly rewarding experience, it may come with some unforeseen liabilities that can come back on you personally. Before you sign on the dotted line, you may want to consider these five important risk mitigation techniques.

Review the organization’s background and reputation. Research the company to make sure you fully understand the organizations goals, mission and how it is operated. You can request copies of their annual reports, financial statements and articles & by-laws. Inquire if there are any pending or past lawsuits or claims against the organization. Take a look at the employment policies & procedures. We have seen an uptick in employment practices claims brought against organizations in recent years. Be sure to understand the organizational structure and get to know the individuals you will be working with to make sure you will work well with this potential team.

Review your board member agreement.
Your board member agreement is legally binding, so it’s important to understand your role, responsibilities and what is expected of to avoid any unpleasant surprises down the road. Identify what tasks are required of you and make sure you’ll be able to fulfill the requirements of this new role. It never hurts to have a lawyer look it over as well.

Check for Director’s and Officer’s Liability Insurance
Always request copies of the insurance coverage the organization carries. This can include coverages like general liability, workers compensation, crime, employment practices liability, and, of course, directors and officers coverage. Review all limits and policies to make sure they are adequate for the operations and assets of the organization. If the organization does not have these policies in force, you should request they purchase them prior to joining the board. Keep in mind, your personal assets can be subject to lawsuits and judgments made against an organization once you become a board member.

Attend a board meeting before joining.
It’s important for you and the organization to ensure that you’ll be a good fit for the team. What better way to see if you mesh well than to take a test drive and sit in on a meeting before making your official commitment.

Consider purchasing individual Director’s and Officer’s Liability Insurance.
This coverage can enhance or add to the underlying coverage the organization has in place. This coverage can often be added to some personal excess liability policies. If not, purchase an individual policy to ensure your personal interest is protected beyond whatever the organization might have in place for its directors and officers.

By following these tips for risk mitigation prior to joining a board you can set aside any concerns about personal liability and focus in full on helping the organization succeed.

Sheri Jamme is a Senior Client Manager with the Risk Strategies Private Client Group Burlingame Office. She can be reached at Sheri.Jamme@maccorkle.com.

The contents of this article are for general informational purposes only and Risk Strategies Company makes no representation or warranty of any kind, express or implied, regarding the accuracy or completeness of any information contained herein. Any recommendations contained herein are intended to provide insight based on currently available information for consideration and should be vetted against applicable legal and business needs before application to a specific client.

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