Nonprofit organizations provide important benefits to society, but because these organizations are often seen as charities, there is a false assumption that these organizations simply are not sued and do not have a lot of liability exposure. This is frankly not the case. For those who work for nonprofits and are wondering if they need liability insurance or coverage, there is no simple yes or no answer. Therefore, it is important to think about the reasons why nonprofit organizations might have liability exposure, what this exposure looks like, and what they can do to protect themselves from such exposure.
First, it is important to examine the types of claims that might be brought against a nonprofit organization. In reality, there are countless circumstances in which someone might bring a claim against a nonprofit organization. In a society that is becoming increasingly litigious, liability claims are simply becoming more common. People and groups are able to, and often do, sue nonprofit organizations. For example, if an employee of a nonprofit organization ends up getting hurt on the job, they could file a worker’s compensation claim. If this claim is unfairly denied, then this could lead to a lawsuit. This is one potential type of liability that a nonprofit organization might have to face.
Another common situation that nonprofit organizations might encounter involves a breach-of-contract case. Similar to other businesses, nonprofit organizations enter into business contracts with certain partners and are thus expected to uphold their end of the contract. If they do not uphold this contract for any reason, they might end up facing a breach-of-contract case. This is another type of liability. Particularly as it pertains to the current COVID-19 pandemic, breach-of-contract cases are becoming more common. As a result, nonprofit organizations need to protect themselves. Their first question is usually, “How do I fill out form 990?” There could also be a force majeure clause in the contract that could allow them to breach the contract without facing any significant penalties.
Finally, another type of liability that nonprofit organizations need to keep in mind involves accidents that happen on their property. For nonprofit organizations that have physical locations, there is always a chance that an employee or a customer could slip and fall, hurting themselves. Some of the most common injuries people suffer in slip and fall accidents include broken bones, head injuries, and back injuries. A nonprofit organization might be held responsible for this, leading to a significant personal injury lawsuit. Therefore, it is a good idea for nonprofit organizations to find ways to shield themselves against this type of liability as well.
Even though nonprofit organizations provide important benefits to society, they still function like other businesses. Because of this, they are exposed to similar types of liability. This liability exposure can be significant, so it is important for all nonprofit organizations to take steps to protect themselves. This could involve investing in liability insurance, which could protect the nonprofit organization by covering potential settlements and legal expenses that could arise as a result of liability claims. When nonprofit organizations are proactive about protecting themselves, they place themselves in a position to better carry out their mission. In today’s society, it is important for everyone who works for a nonprofit organization to do a quick liability assessment and make sure they are properly protected against future claims.