Running a nonprofit organization can be very rewarding, but can also be quite stressful due to a litany of risks and liabilities nonprofit organizations face. You might have the vision, patience and commitment needed to drive your organization to success, but it is essential to be aware of the risks facing nonprofits so you can prepare for them. Here is a look at some of the most common liabilities nonprofit organizations must consider.
Dissatisfied Staff & Volunteers
Any time you are working with a group of people, it can be challenging to keep everyone happy. However, nonprofit boards need to keep in mind that dissatisfaction can pose a legal risk. For example, employees who have been terminated could argue that their termination would fall under wrongful termination.
As an employer, your nonprofit organization could be found to be legally responsible in cases where the termination breaches one or more terms stated in the employee’s contract. Employment practices liability insurance offers some protection in this area.
Copyrights & Trademarks
Some nonprofit staff members are not aware of the legal ramifications involved in using the work of others. What may seem like innocent copying and pasting could land your nonprofit in court. Likewise, failing to protect your own written and artistic expression or logos could prove to be a costly mistake. Commercial general liability insurance can offer protection in this area.
Failing To Manage Conflicts Of Interest
The nonprofit sector has been under increased scrutiny in recent years when it comes to conflict of interest. Nonprofits that do not handle conflicts of interest appropriately face risks such as losing public confidence or becoming part of a major scandal.
A conflict of interest can arise when a nonprofit’s manager or leader’s financial, personal, or other interests might conflict with the nonprofit’s interests.
Lobbying & Political Activity Issues
The IRS has restrictions in place that impact the ability of some tax-exempt nonprofits to participate in governmental affairs activities. Nonprofits need to understand when they can safely engage in advocacy and when they need to avoid involvement.
They must also be fully aware of and compliant with the relevant state and federal lobbying disclosure requirements, campaign finance laws, and gifts and ethics rules.
Social Media Issues
The internet and social media may make communication faster and more convenient than ever before, but they also pose a significant risk. For example, using social media to ensure that potential employees fit in with your organization’s culture could lead to claims of discrimination and privacy violations.
Posting materials from presentations might seem like a good idea, but there could be trademark and copyright infringement issues as a result. Moreover, employees who express their views online or on social media while identifying themselves as employees of the organization could also expose your nonprofit to liability for noninterference to harm your reputation. Cyber insurance can offer some protection to nonprofits in this regard.
Third-Party Sexual Harassment
Sexual harassment can be a tricky area to navigate. While many people these days understand the serious nature of sexual harassment among employees, it is important to be aware that there is also the potential for claims to be made alleging third-party sexual harassment by vendors or volunteers.
Language prohibiting harassment in a nonprofit’s employment policies needs to be worded broadly to include third-party harassment. When claims do arise, they need to be handled quickly and carefully, and training needs to be carried out to prevent it from happening in the first place. Employment practices liability can add another layer of protection for nonprofits.
Misuse Of Funds
Every nonprofit has a defined mission and specific reason for existence. Its board must ensure that the organization stays focused on that mission, and monitoring its use of funds is a big part of this. Many nonprofits receive funding that has limitations placed on its use. When these funds are misused early, the funder could withdraw their money and require repayment.
Likewise, funds used for reasons other than serving the nonprofit’s mission can cause the organization to lose its tax-exempt status and bring about legal actions. Fundraising Organizations face several liabilities related to fundraising. Some organizations are finding fraudulent groups raising funds on their behalf – funds that they never end up receiving. They might also suffer losses related to injuries at fundraising events hosted by these imposters.
That is why nonprofits need to protect themselves against the improper use of their name and logo and respond quickly any time they catch a party using their name or logo without authorization. In addition, organizations need to be selective about the sponsors and partners they choose to work with because of the potential damage to their reputation by being associated with other parties who do not act appropriately.
Reach Out An Experienced Nonprofit Insurance Brokerage
Find out how you can protect your nonprofit organization from a broad range of risks by getting in touch with the nonprofit insurance professionals at CI Solutions by calling 703.988.3665 or by contacting them online. The experienced Northern Virginia commercial insurance brokerage can advise you on the best policies to address the risks your nonprofit organization is facing.