Millions of Americans donate time—their most valuable asset—to
serve as a volunteer board member on non-profits, booster clubs, churches, PTAs
and civic organizations, just to name a few. The decisions these folks make can
have a dramatic impact on their respective organization—and not always for the
better. If a volunteer endeavor goes bad, would a volunteer board member have
coverage against a lawsuit under his or her homeowner’s policy?
The last thing volunteers want to consider is what would
happen if their favored organization file suit against them as a result of
their efforts. But it happens, and not infrequently. This does happen,
especially when volunteers make decisions that directly influence the finances
of an organization. Often, the only insurance these volunteers have to back
their efforts is a homeowner’s policy. Unfortunately, this policy may be of
The reason homeowners’ policies do not usually cover
liability stemming from actions as a volunteer is the nature of the claim. The
policy is designed to cover claims of “bodily injury,” such as someone slipping
on cracked pavement in your driveway; and/or “property damage,” such as accidentally
setting your neighbor’s house ablaze when burning some brush on a windy day.
Claims against board members do not usually involve
bodily injury or property damage. Rather, they involve bad decision-making that
results in financial loss to the organization, such as the decision to invest
in an IT system that turns out to be a debacle, costing the organization
tremendous time and money.
There is another problem. Homeowners policies do not
cover “professional services.” This is important to note, because board members
are often asked to serve in a capacity consistent with their profession. For
example, a church member who is a CPA may be asked to serve on the church’s
board as finance chairman. Even though he is not paid for his services, the
“professional services” exclusion under his homeowner’s policy would still
In addition to the above, homeowners policies do not
cover claims of personal injury unless this coverage is specifically added.
Personal injury insurance is added to the homeowner’s policy to cover claims
such as libel, slander, wrongful eviction, and false advertising.
What to Do
Events causing claims are unpredictable. While the
reasons shown above prove it’s unlikely, not all claims against volunteer board
members are excluded by a homeowners policy. Decisions to purchase personal injury
coverage and a personal umbrella policy will increase your ability to find
coverage for a suit against you.
The best method for insuring the actions of board members
is for the organization to purchase a directors and officers (D&O)
liability policy. These policies are relatively inexpensive for most
non-profits. Before volunteering, request information on the organization’s
D&O policy. The absence of this insurance leaves you at risk of having no
personal insurance to defend a suit brought against you by the organization and
should influence your decision to serve.
TLIG is a local Trusted Choice®
agency that represents multiple insurance companies, so it offers you a variety
of personal and business coverage choices and can customize an insurance plan
to meet your specialized needs.
Visit us online at www.tligins.com or call us at (434) 582-1444.