Introduction

Professionals, Retirees, and many casual citizens of all ages are asked to participate on the Board of Directors for a local 501(c)3. Many have asked me, "What is my potential liability if I do this?" or "Should there be an insurance policy in place?"

The video above, and this blog will hopefully provide you with some assistance in answering those questions. 

Insurance

Answering the easiest question first, YES there is insurance specifically designed for 501(c)3 boards and officers. If you are on a board for a large, multi-million dollar Non-Profit organization, it may be worth having one of these sorts of policies. However, they are far from required. 

What is your real risk?

Chapter 617 of the Florida Statutes specifically deals with Not for Profit Corporations. Generally speaking, directors are indemnified from liability with the exception of a few circumstances generally involving self serving behavior on behalf of the director. So long as a director acts reasonably under the circumstances, they will generally be safe from a civil suit against the organization. More specifically, the relevant portion of the statute states (emphasis added):

617.0830  General standards for directors.—

(1) A director shall discharge his or her duties as a director, including his or her duties as a member of a committee:

(a) In good faith;

(b) With the care an ordinarily prudent person in a like position would exercise under similar circumstances; and

(c) In a manner he or she reasonably believes to be in the best interests of the corporation.

(2) In discharging his or her duties, a director may rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:

(a) One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented;

(b) Legal counsel, public accountants, or other persons as to matters the director reasonably believes are within the persons’ professional or expert competence; or

(c) A committee of the board of directors of which he or she is not a member if the director reasonably believes the committee merits confidence.

(3) A director is not acting in good faith if he or she has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (2) unwarranted.

(4) A director is not liable for any action taken as a director, or any failure to take any action, if he or she performed the duties of his or her office in compliance with this section.

Conclusion

Generally speaking, the state of Florida wants you to feel free to participate on a board of directors, not prevent you from doing so. To find an organization you might be interested in being a part of right here in St. Johns county, visit http://stjohnsvolunteers.org.