[Kzyxtalk] Liability of Directors, Insurance

[dennisobrien at sharejerusalem.com]

Volunteer directors of a nonprofit corporation are not liable for monetary damages only if the corporation carries liability insurance (see Corporations Code Section 5239, below).

I do not offer an opinion as to whether any of the issues raised on this list could give rise to a claim for monetary damages. However, I am concerned by the report, if accurate, that the organization does not at this time carry liability insurance.  Even in the smaller nonprofits I have assisted, liability insurance was a top priority when budgeting resources.

Dennis


5239.  (a) There shall be no personal liability to a third party for
monetary damages on the part of a volunteer director or volunteer
executive officer of a nonprofit corporation subject to this part,
caused by the director's or officer's negligent act or omission in
the performance of that person's duties as a director or officer, if
all of the following conditions are met:
   (1) The act or omission was within the scope of the director's or
executive officer's duties.
   (2) The act or omission was performed in good faith.
   (3) The act or omission was not reckless, wanton, intentional, or
grossly negligent.
   (4) Damages caused by the act or omission are covered pursuant to
a liability insurance policy issued to the corporation, either in the
form of a general liability policy or a director's and officer's
liability policy, or personally to the director or executive officer.
In the event that the damages are not covered by a liability
insurance policy, the volunteer director or volunteer executive
officer shall not be personally liable for the damages if the board
of directors of the corporation and the person had made all
reasonable efforts in good faith to obtain available liability
insurance.