Can a Non-profit Organization Be Held Liable for its Actions?In most states a non-profit organization is considered a legal entity capable of suing and being sued. So a non-profit must abide by its contracts, and exercise the same duty of care as any other business or individual would. When Are Directors, Officers, and Members of a Non-profit Liable?Just as in most corporate settings, directors and officers of non-profit organizations are given great discretion to manage their organization. Only in rare circumstances, such as acting in bad faith, will a director or officer be held liable. This is known as the business judgment rule. As for members, most states will not allow individual members of a non-profit organization to be liable for the actions of the non-profit. On the other hand, a non-profit will only be liable for the actions of its members if they are acting within the course and scope of the organization. Thus a member responsible for breaking the law will be personally liable unless they are acting as the agent of the non-profit. How Can Non-profit Organizations Limit Liability?
There are several steps a non-profit can take to limit its liability including:
- Buying liability insurance
- Using limitation on liability clauses in contracts
- Having clear policies and procedures
How Can a Lawyer Help?
If you are a non-profit organization and a lawsuit has been brought against you an experienced business attorney can advise you of your legal rights and defenses.
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