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Risks and Insurance

Can we be sued?

One of the most common questions I'm asked by volunteers 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.

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: 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.

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 is 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 to manage the risks. 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 & screen volunteer applications
      • Train & supervise volunteers
    • Review & 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 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.

Insurance

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; 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 nonprofit groups should be able to conduct their programs and have peace of mind.

FEATURED BLOG

Women in Philanthropy (5 Easy Tips to Do It Smartly)

Sandra Pfau Englund

Oct 11, 2019

An excellent opportunity exists for nonprofit leaders to attract women in philanthropy to their cause. Recently, Boston Consulting Group reported the money controlled by women will reach $72 trillion in 2020. That's 32 percent of total wealth! And, the reporting also said that most wealth will go to women. Thus, as the nonprofit sector changes, one of the reasons is because of women. But, as with any donor group, you have to attract them smartly.

On female donors, Fidelity Charitable published an excellent report. The Women and Giving: The impact of generation and gender on philanthropy reported.

  • 72 percent of Boomer and 55 percent of Millennial women report giving satisfaction.
  • Female donors have a "social approach" for giving. In other words, three-quarters of women give with their hearts.
  • Female donors promote giving with friends, partners, and families.
  • Boomers prefer traditional ways of giving. And, Millennials are open to trying crowdfunding, for example.
  • Women who give to charity are more "engaged and empathetic."
  • Female donors seek expert advice when deciding on charity.
  • Women have a higher likelihood to question finances in giving than men. Meaning, they want advice on taxes or how giving will impact their finances.

All this points to an excellent chance for nonprofit leaders to build relationships with women. And, with a consistent effort, charities or people that seek to start a nonprofit can increase female involvement. In turn, it will help your group grow.

How nonprofits can include women in leadership

The first place that nonprofits can look to add women in philanthropy is in their teams. So, ensure you promote gender equality in your group. By doing so, you'll make it clear to female donors that you care about them. If women and men equally represent your team, then keep going and doing what you're doing. But, don't forget to also look at your management team. You want to make sure that there is gender equality there as well.

Also, when you recruit people into your team, do it blindly. Meaning, in today's world, smart groups practice blind recruiting. As well, make it a point to have written harassment and discrimination policies. Doing these things will help you ensure that your group is walking the walk. In sum, a gender-equal team will encourage female donors to give to you.

5 Tips to Get Women Involved In Your Cause

Once you've got your house in order, focus on female donors and getting them engaged with your cause. We have several ideas to share with you. 

1) Recruit female donors onto your board

If you seek to increase giving by women, then you have to begin with leadership positions. As you did with your team, look at the number of women on your board. Take the time to work with the nominating committee to ensure gender diversity. Also, get equal representation of race, religion, sexual orientation, etc. Diversity is an excellent thing for any group. Simply, diversity and inclusiveness expand your base of support.

2) Show women in philanthropy what you do

Typically, when men give to charity, they seek performance and metrics. But, female donors bring a more heart-based approach to giving. Thus, remember that women want to know about the good that their donations will do. It's common in nonprofits to tour major donors and provide them an understanding of the work. This is something that can also happen with any donor who gives whatever amount. So, use digital (e.g., live streaming) and real-world techniques to show your programs, especially to female donors.

3) Remember that women care about their finances

When you're dealing with female donors, remember they care about their finances. As a result, when they give major gifts, they will likely speak to their legal or financial advisor. Many charitable vehicles exist that could benefit the donor and your charity. If you don't have someone with technical expertise on charitable giving (e.g., gift planning), hire a consultant. Doing so will ensure that you can get high-level gifts for your nonprofit.

4) Create social opportunities for women

Since female donors are more social, create ways for them to get involved in your cause socially. As reported by Fidelity Charitable, women want more engagement. There are several ways you can get women engaged with your group. First, make sure that women represent your board equally. Also, develop volunteer opportunities where women will experience the work. Finally, create social events where women will share their experiences. For instance, consider donor receptions, live streams, or community service events.

5) Women are not all the same

Don't treat all women in the same manner. Just as you personalize your message to different groups, remember that women are different from each other. As noted above, Boomers tend to use traditional methods for giving. Millennials have a higher chance to give to a crowdfunding fundraiser..... Women involved in religious groups give differently than non-religious ones. So, take the time to understand how women give to charity.

Finally, as a nonprofit leader don't only focus on major gift female donors. Most women are not millionaires or billionaires. But, that doesn't mean that they can't support your group. For instance, when you review your data to pick up giving patterns, take a look at lifetime giving. You will find female donors who support your cause with many small gifts. That's a clue to you that you should increase your engagement with them. In sum, take a thoughtful approach toward getting more women involved. When you do so, you'll see higher results in your nonprofit.


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