Association Leadership - September/October 2008 - (Page 33)

volunteers: insurance Volunteer Leaders ssociations depend heavily on services provided by volunteer leaders in all kinds of roles, from board members to committee members to helpers at association functions. These individuals should not have to worry about risking assets every time they attend an association function or make a decision that affects the association. Adequate liability insurance for the association and its volunteer leaders can reduce this concern. But wait! What about laws providing immunity to directors and ofﬁcers of nonproﬁt organizations? The Texas legislature has passed special legislation to provide limited immunity to directors and ofﬁcers of non-proﬁt corporations. The key word here is “limited.” Under Chapter 22 of the Business Organizations Code, ofﬁcers and directors are not liable for an action taken or omission made, as long as they act in good faith with ordinary care. However, the law won’t keep someone from suing the association and its volunteers. Even if immunity applies, lawyers must be engaged to respond to the lawsuit and prove that it applies. That’s why it is so important for the organization to purchase all kinds of liability insurance with adequate limits of liability. Directors and Ofﬁcers Liability Insurance. Association leaders can be sued by anyone who feels harmed by decisions made while managing the association’s ﬁnancial affairs and establishing policies. Directors’ and ofﬁcers’ liability insurance (D&O) protects organizations and their directors and ofﬁcers against these kinds of potential losses. Coverage and exclusions in D&O policies vary signiﬁcantly from one insurer to another. Some insurers offer policies to nonproﬁt organizations under different monikers, like “association professional liability” or “nonproﬁt protection liability.” The two most important deﬁnitions in the D&O policy are those deﬁning “wrongful acts” and “covered persons.” The typical D&O policy deﬁnes “wrongful act” as “any actual or alleged error, misstatement, misleading statement, act or omission, or neglect or breach of duty by the directors or ofﬁcers in the discharge of their duties solely by reason of their being directors or ofﬁcers of the organization shown in the Declarations.” The persons covered under the typical D&O policy include past, present, and future directors and ofﬁcers. Exclusions in a D&O policy can have a profound effect on the scope of coverage the policy provides. The typical policy precludes coverage for claims arising out of: • Acts involving any personal proﬁt or advantage to the director or ofﬁcer • Criminal, dishonest or fraudulent acts • Failure to maintain insurance • Pollution incidents • Responsibilities under the Employee Retirement Income Security Act (ERISA) • Bodily injury, sickness, disease, death, emotional distress, personal injury or property damage • Actions of one director or ofﬁcer against another or of the organization against a director or ofﬁcer An insurer may remove or modify some of these exclusions for an additional premium. Other types of policies are available to cover wrongful acts involving ERISA and to cover bodily injury and property damage. General and Automobile Liability Insurance. The commercial general liability (CGL) policy covers bodily injury, property damage and personal and advertising injury claims arising out of the association’s premises and activities. Volunteers are covered by most CGL policies should they be sued individually sued because of an Liability Insurance for accident occurring while working for the organization. This protection does not extend to an injury to an employee of the organization or fellow volunteer – this may be covered by the liability insurance provided on the individual’s homeowner’s policy. The automobile liability policy covers bodily injury and property damage liability arising out of automobiles owned by the association, as well as automobiles rented for association activities or used by others on association business. Volunteers are covered while operating association vehicles, but not while operating their own vehicles on association business – this is covered by the volunteer’s own personal auto policy. Where to Go for Advice. The association’s insurance agent should be consulted about the types of liability policies needed by the organization and the limits of liability insurance that might be needed. Volunteer leaders should review their personal liability insurance needs – including homeowners, automobile and personal umbrella – with their insurance agents. ◆ NOTE: David Surles, CPCU, AAI, is director of professional liability for the Independent Insurance Agents of Texas. September/October 2008 | Association LEADERSHIP 33

Table of Contents Feed for the Digital Edition of Association Leadership - September/October 2008

Association Leadership - September/October 2008 Contents President’s Column Homepage 60-Second Solutions An Interview with TSAE’s New Chairperson TSAE’s Newest Board Members Vetting Volunteers Orientation of Volunteer Leaders Get on Board – Qualification Considerations Questions to Ask Before Saying Yes Liability Insurance for Volunteer Leaders Committee Planning TSAE’s Annual Golf Outing Congratulations to Our New CAEs Perspectives Association Case Study New Members Community Spotlight San Antonio Beaumont Index to Advertisers Advertiser.com The Lighter Side of Associations

Association Leadership - September/October 2008

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