Resources & Insights


Liabilities for the Board of Directors

Non-profit organizations provide essential social services that benefit communities and their members. The vast majority of these organizations cannot survive without a volunteer board of directors assigned to elect officers, adopt policies and make major financial decisions for the organization. Although members of the board are volunteers, there is a certain amount of risk involved in holding one of these positions. Specifically, even when acting in good faith, board members are subject to personal liability, which may affect their personal financial status because of their management decisions.

It is imperative that your organization and board of directors understand the risks involved with their responsibilities as board members and the ways in which they can protect themselves from personal liability.

Risks and Responsibilities

To combat the chance of affecting the personal liability of board members, non-profit organizations should assess the risks involved with holding these positions. Your organization should first develop a volunteer risk management committee to identify all risks and pose solutions to minimize potential harm. In addition, you need to ensure that the board members understand their governance responsibilities. Your non-profit should educate its board on their legal duties, fiduciary duties and decision-making roles. Furthermore, the risk committee should ensure the following:

  • The organization is working within its stated mission.
  • Funds are spent according to the mission and spending decisions are known to donors.
  • The organization does not accept donations with conditions.
  • Individuals advancing personal agendas counter to the organization’s mission are not allowed to sit on the board.

Once the risks are assessed and the board of directors is aware of those risks, board members must also understand the responsibilities associated with the positions they hold. Legally, board members have three main duties:

  1. Duty of Care: The individual should act in the way that a reasonable person would act in a similar position and under similar circumstances. Acting under good faith is an essential part of the functions of the board.
  2. Duty of Loyalty: The individual should place the organization’s financial interests as the primary responsibility. As a board member, one should not use his or her position for personal gain, financially or otherwise. In addition, individuals should be honest about business ventures that pose a conflict of interest when acting as a representative of the organization.
  3. Duty of Obedience: The individual should try to further the mission of the non-profit by supporting board decisions and implementing policies as they are outlined.

Board members who fail to fulfill their duties as outlined above may be held liable for their actions or inactions.

Protections

Since there are risks involved with being part of a non-profit board of directors, there are several protections available to minimize personal liability. First, most non-profit organizations have indemnification provisions in their bylaws. These provisions explain that the organization will cover or reimburse the legal expenses accrued by board members in the event of a lawsuit. However, it should be noted that indemnification is only as good as an organization’s financial ability to pay it. If an organization does not have excess funds, it may not be able to support this provision.

Incorporated organizations are required by law to indemnify their directors for such losses. There is no such obligation imposed upon unincorporated groups, but most groups do offer indemnities because it is a good policy to do so.

Finally, non-profit organizations should strongly consider purchasing directors and officers (D&O) liability insurance to cover their board members in situations that fall outside of the indemnification provisions or in the event that their financial situation does not allow them to cover extensive legal expenses.

Beyond providing a financial backing to indemnification provision, D&O liability insurance is essential since most individuals will not volunteer on a board with the knowledge that they are risking their personal assets in the event of litigation.

More Information

Proper insurance coverage and other risk management strategies can help ensure that your organization and its board of directors is protected against liability. For more information about appropriate insurance coverage, contact Megson FitzPatrick Insurance Services at (250) 595-5212 today.


Tis the Season to Celebrate… Safely!

Cheering up

Promoting Safety and Sobriety at Company-sponsored Events

To promote the safety and sobriety of your employees and guests at company-sponsored events, review the following recommended control measures:

  • Serve drinks to guests rather than offering a self-serve bar.
  • Set up bar stations instead of having servers circulating the room; if offered, people are inclined to accept drinks they wouldn’t have otherwise ordered.
  • Place table tents at each bar reminding employees and guests to drink responsibly.
  • Don’t price alcohol too low, as it encourages over-consumption.
  • Offer a range of low-alcohol and alcohol-free drinks at no charge.
  • Require servers to measure spirits.
  • Always serve food with alcohol.
  • Close the bar an hour before the scheduled end of the party.
  • Do not offer a “last call” as this promotes rapid consumption.
  • Never raffle alcohol or hold contests that involve buying or drinking alcohol.
  • Entice guests to take advantage of safe transportation options by subsidizing taxis or promoting a designated driver program.
  • If your event includes a program or speaker, schedule it for after dinner and drinks are served. This allows additional time for alcohol to wear off.

Before your company hosts its next event, contact Megson FitzPatrick Insurance Services. We can review your coverage and assist in developing a risk management plan that keeps safety a top priority at your company-sponsored events.

Limiting Social Host Liquor Liability

Liquor liability exposure is not limited to those whose primary business is the sale of alcoholic beverages. Know the law in your jurisdiction and take steps to control your risk.

A bartender is legally liable for serving alcohol to a patron who becomes intoxicated and then injures a third party. Does a business face a similar exposure when it hosts a social event where alcohol is served, such as an open house or employee picnic?

Anytime you provide alcohol to individuals in a non-commercial manner, you are considered a social host. After the Supreme Court of Canada’s decision in Childs v. Desormeaux, social hosts generally are not responsible for the acts of guests that consume alcohol.  However, a social host may become responsible for the acts of their guests if their conduct creates or exacerbates a risk to the public. It is important to take the appropriate steps to control your risk.

Create a Risk Management Program

An important first step in limiting your liquor liability is to implement a risk management program. The liquor liability program must have the support of management, be communicated to supervisors and employees, and include a policy advising employees to drink responsibly at company events.

It’s also important to have a program in place that includes the following recommendations when working with third-party vendors:

  • When working with a vendor, such as a caterer or bartender service, verify they are licensed and insured.
  • Stipulate in your vendor’s contract that only those who have received alcohol-awareness training should serve or sell alcohol at your event.
  • Require the vendor to provide Certificate of Liability Insurance to include events and liquor liability coverage naming your company as an additional insured.

The program should outline the procedures for handling intoxicated guests. This includes delegating who will assess the situation, such as hotel security or someone from your organization, and outlining appropriate actions for dealing with or removing a guest who has overindulged.

In the Event of an Incident

If an incident occurs, fill out a liquor liability incident report documenting measures taken to control the intoxicated person.

It’s also important to have a program in place that includes the following recommendations when working with third-party vendors:

  • When working with a vendor, such as a caterer or bartender service, verify they are licensed and insured.
  • Stipulate in your vendor’s contract that only those who have received alcohol-awareness training should serve or sell alcohol at your event.
  • Require the vendor to provide Certificate of Liability Insurance to include events and liquor liability coverage naming your company as an additional insured.

Liability Insurance

In addition to proper liquor liability planning and education, review your company’s current general liability insurance policy to determine your coverage in social-host situations.

Remember, even with the proper coverage, an events and liquor liability policy does not eliminate your exposure if alcohol service is in violation of a statute, a minor is served or an already intoxicated person is served.


Snow & Ice Removal

Megson FitzPatrick, Insurance Brokers, Winter, Snow and Ice removal

Owners and managers of commercial property have an obligation to maintain safe conditions for employees and occupants. During the winter season, walkways, stairs, driveways, interior roadways and parking lots become slip and trip hazards as snow falls and ice forms. This is not only a safety hazard, it can also be an expensive legal issue for property owners, if an accident occurs.

To prevent injuries and minimize injury costs, commercial property owners should consider implementing a snow removal program using our checklist provided.

Download our free Snow and Ice Removal Checklist-2015


Host Liquor Liability- Know your risk exposure.

Christmas

A bartender is legally liable for serving alcohol to a patron who becomes intoxicated and then injures a third party. Does a business face a similar exposure when it hosts a social event where alcohol is served, such as an open house or holiday party?
Anytime you provide alcohol to individuals in a non-commercial manner, you are considered a social host. Social hosts generally are not responsible for the acts of guests that consume alcohol. However, a social host may become responsible for the acts of their guests if their conduct creates or exacerbates a risk to the public. It is important to take the appropriate steps to control your risk.

Download our free whitepaper: Limiting Social Host Liquor Liability-2015.