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TheStreet Open House

Nonprofit Good Deeds Can Put You in Danger

BOSTON ( MainStreet) -- No good deed goes unpunished.

That old cliche reflects a danger faced by those who volunteer their time and expertise to nonprofit boards.

Volunteering your time and expertise to a nonprofit board could expose your wealth to risks.

Whether it is a charity, civic organization, church or library, serving on a nonprofit board can jeopardize your personal property and assets if lawsuits arise.

Legal claims -- citing such matters as wrongful termination, sexual harassment, discrimination or on-site injury -- may affect not just the organization's ledger sheet. Board members who assume they are protected from lawsuits and personal liability could be in for a rude awakening.

Some states offer immunity for board members who get no salary or compensation should civil damages arise from actions performed in an official capacity. But even that protection only goes so far and doesn't extend to "intentional conduct, wanton or willful conduct or gross negligence." Interpreting that level of egregiousness isn't always easy, though, and a board member's viewpoint may ultimately not be shared by a plaintiff, judge or jury.

Retirement Plans for Nonprofits Get Makeover

"Gross negligence" could rear its head as a result of either actions or inaction, and lack of oversight can come back to haunt a board. If a background check slips through the cracks for an employee or volunteer that works with kids, the board may find themselves in deep trouble if a sexual assault takes place. A mix-up that delays getting a contractor to fix a loose handrail is an accident -- and lawsuit -- waiting to happen. Letting a donor have one glass of wine too many at an event sets the stage for a costly accident.

With these hazards in mind, many nonprofit organizations buy Directors and Officers Insurance. These policies, and related products, can help insulate board members -- often volunteers tasked with important decisions -- from unexpected grabs at their personal property and money.

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