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Nonprofit Risk; Nonprofit Insurance

By · October 11, 2008 · 2008 Ark. L. Notes 199
In categories: Insurance Law

Volunteerism provides an outlet for talented individuals to give back to the community. One potential impediment to volunteer activity, however, is the potential for legal liability.  Two primary areas of concern include 1) the vulnerability of the nonprofit organization itself, and 2) the status and potential personal liability of the nonprofit’s volunteers, in their individual capacities.  This note addresses the risks inherent in nonprofit activity and explores statutory, common law, and insurance product protections against those risks.

As more fully developed in this note, the nonprofit’s own liabilities can be, and are, limited in two distinct ways.  First, statutory law provides for mechanisms to incorporate nonprofit entities, and such incorporation by its nature will separate out the nonprofit’s identity and liability from the identity and liability of its constituent members.  Second, as to nonprofit assets, at least in Arkansas a common law rule exists against execution upon a nonprofit’s assets; moreover, Arkansas statutory law places limitations on liability to the extent the nonprofit is covered by liability insurance.

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