Insurance essentials: insurance insiders explain why it's foolish to confuse "not-for-profit" with "not-at-risk". (Board Primer).

The benefits of being a volunteer leader are many, most notably the satisfaction of contributing to the progress of your trade or professional organization. But sometimes volunteer directors or officers learn the hard way the meaning of that old bromide, "No good deed goes unpunished."

When you agreed to serve, you didn't expect to risk your personal assets on liability claims. Nevertheless, just about every function within your association could pose a risk of liability for harmful acts. To protect volunteers like you from personal loss for the organization's liabilities, Association Professional Liability Insurance--also known as Directors and Officers liability insurance--was developed. But not all coverage protects against all kinds of risk. For that reason, it behooves you and your fellow directors to make sure that included in your association's policy is such basic protection as an indemnification clause to hold you harmless.

Whatever you do, don't fool yourself into thinking that liability risk is a problem you can ignore. "The trouble begins with the assumption that 'not-for-profit' means 'not-at-risk.' That's not the case," says Jackie LaRock, vice president and not-for-profit underwriting manager for the Chubb Group of Insurance Companies, Simsbury, Connecticut. "We're seeing an increase in both the frequency and severity of claims involving not-for-profit organizations. In times when anyone can sue for anything, actions of volunteers who aren't properly trained and supervised can result in liability for the association, the board, and themselves."

When you're reviewing your APLI insurance, it's important to be aware of the areas in which nonprofit directors may be especially vulnerable now.

* Employment practices liability. This "remains the largest exposure for not-for-profits and comprises the greatest trend in claims," says LaRock.

Brad Lacey, product manager of Philadelphia Insurance Companies' Specialty Lines Division, agrees. "The risk to associations is no less than the risk to major global corporations," he says. "Any employee can bring an action for things such as wrongful termination, sexual harassment, age discrimination, or equal opportunity. These are all big issues for not-for-profits," making it vital that you include broad EPL coverage in your APLI policy.

* Credential-related discrimination claims. This is an area of special concern if your association sponsors member peer-review activities such as credentialing or certifying of professional standing. Constituents who don't make the grade could bring a claim against your association, its leaders, and relevant volunteers.

* Internet liability. One potential source involves libelous statements that are made on your association's listservers--even if the statements didn't originate with anyone at your organization but are contained in material quoted from another source. "In these times when every organization functions as a publisher," Lacey says, "all the communications liability risks apply."

* Workplace violence liability. Many APLI policyholders have pursued this coverage (like Internet liability coverage) in the past two years especially. "Workplace violence is, sadly, becoming more prevalent in the United States," notes Lacey. Victims of workplace violence could claim that in the absence of security procedures or facilities, your association's employed or volunteer leaders have been negligent.

Lacey mentions one other source of vulnerability that could grow. Across the country, accounting and management missteps continue to come to light. Though up to now most of those liabilities have been limited to corporations, "there's no real reason associations can feel they are safe from similar scrutiny or charges of fiduciary liability," he says. Lacey recommends finding out if fiduciary liability insurance will be valuable to the trustees (usually organization officers) of your association's benefits plans when they are acting in a fiduciary capacity.

Those are some particular areas of vulnerability. Here is some advice on how to protect yourself with a wise buying decision.

1. Make sure the policy you choose is tailored to your type of board and association. "There's a huge world of associations and not-for-profits--everything from the local kids' sports leagues to large national charities," says LaRock. "For that reason, there is no one-size-fits-all policy." You must take the initiative to learn about the full range of risks your board and your organization could encounter and then make sure you have the right protection in place.

2. Keep in mind the variety of kinds of coverage. You need insurance protection for directors, trustees, and officers of your association as individuals. But you also need coverage for the association itself as an entity, Lacey says, so that the policy will respond if the association is named in a liability claim.

3. Finally, think carefully about how to balance cost and coverage. True, the corporate world is more vulnerable to today's hardening insurance market--one in which insurance can become far more pricey (when it's available at all). But nonprofits are vulnerable nevertheless to price increases and problems of scarcity. Just be sure economizing doesn't lead to intolerable risk. As Lacey says, "As risk managers or chief executives of associations try to stretch their insurance budget, directors should watch for any gaps in coverage that could affect them."

Dick Goff is president of MIMS International, Ltd., an insurance broker and program administrator based in Towson, Maryland. E-mail: [e-mail].