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What happens if someone decides to sue your organisation?

02
Aug
2013

Will your Board and / or Management Team be held personally liable? How will you pay the legal costs involved?

It is the key responsibility of a Not For Profit Board of Directors or Management Team to steer the organisation to accomplish its mission, while fulfilling a legal duty to utilise the organisation’s assets prudently.

These assets could include:

  • People (eg. Board members, volunteers, employees, clients and the general public)

  • Property (eg. buildings, equipment, materials and facilities)

  • Income (eg. grants and contributions)

  • Goodwill (eg. the organisation’s reputation and its ability to appeal to prospective volunteers and raise funds)

Of course, it is also the Management Team or Board’s tremendous responsibility to ensure these assets are protected. However community organisations run the risk of being sued for alleged transgressions such as incompetent supervision, ineffective administration, misuse of assets, discrimination and / or harassment or employee wrongful termination.  This puts the above mentioned assets at risk.

Minimising risk through carefully defined organisational and Board processes can assist greatly, but it’s still important to ensure your organisation is protected with appropriate insurance in the unfortunate event of legal action.  Otherwise, the financial ramifications could be significant, both for the organisation and for its Directors' and Officers' personally.

Association Liability Insurance is the solution.

Association Liability Insurance is designed to protect a community organisation and its Directors, Officers and voluntary workers for liabilities that arise out of the work of the organisation. 

Consider the following example exposures:

  • A former staff member takes action against your organisation

  • You have to employ the services of a public relations consultant due to a widely publicised issue experienced by your organisation

  • Someone decides to personally sue the Directors and Officers of your organisation

  • Your organisation experiences a tax audit

Then consider how your organisation would cope financially if any of these situations were to occur.  If Association Liability Insurance was in place, your organisation would have financial peace of mind and confidence about being able to continuing operating long into the future.

If your community organisation does not currently have Association Liability Insurance, we highly recommend you investigate this cover and the potential benefits it could provide.



For further information about Association Liability, please contact the Community Underwriting team on 02 8045 2582.

Disclaimer: While all reasonable skill and care has been taken in preparation of this document it should not be construed or relied upon as a substitute for specific legal advice from your legal adviser,  or for specific advice on your insurance needs. No warranty or liability is accepted by Community Underwriting its shareholders, directors, employees, other affiliated companies for any statement, error or omission.

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