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Reducing the liability of association volunteers.

Two years ago in "Washington Comment," we discussed the reluctance of many able and competent professionals to assume leadership roles in professional associations because of their fear of becoming the target of a lawsuit involving their leadership in the association. [1] We are now pleased to report that considerable progress has been made by state legislatures to grant immunity or otherwise limit the liability of association volunteers where there have been no breaches of loyalty, self-dealing or acting in bad faith. Association volunteers are no longer scared off by horror stories of legal liability and the risk of losing a personal fortune just because they are volunteers with a sense of duty and obligation to their profession or their community.

State legislatures were reactive to the lawsuits in which volunteers were involved, and especially the lawsuits that attracted national media attention. Every state now has a law that specifically limits the legal liability of officers and directors of non-stock, not-for-profit corporations (Internal Revenue Code, Sec. 501(c) organization) and about half of the states additionally have laws limiting the liability of association volunteers who are not officers or directors.

Publicity surrounding the states' enactment of laws pertaining to the legal liability of officers and directors of 501(c) type organizations has led to the erroneous belief that all volunteers are cloaked with an immunity from legal liability. Other than officers and directors, the volunteers in only about half of the states have any sort of protection, and even in those states there are numerous exceptions and exclusions. When it comes to protection of the non-officer/director volunteer there remains a diversity of state laws, despite the progress that has been made.

The present challenge is to achieve some relative consistency or semblance of uniformity among those states whose laws provide an element of protection for the non-officer/director volunteer. There are two ways by which the desired uniformity may be achieved. One of these is the Model State Volunteer Service Act. Initiated by President Bush in 1989, the act is directed at providing volunteers liability protection. The President urged the adoption of the Model Volunteer Service Act by the states because it would provide the desired uniformity and, additionally, would enhance the White House efforts to increase volunteerism.

Under the model act, a volunteer is defined as a person performing services for a non-profit organization, a non-profit corporation, a hospital or a governmental entity without compensation other than reimbusement for actual expenses incurred. The term includes an individual serving as a director, officer, trustee or direct service volunteer.

"Non-profit organization" under the model law is defined as any organization which is exempt from taxation pursuant to Section 501(c) of the Internal Revenue Code. A non-profit corporation is any corporation which is exempt from taxation under Section 501(a) of the Internal Revenue Code.

Pursuant to the model law, any volunteer shall be immune from civil liability in any action on the basis of any act or omission resulting in damage or injury if:

1. The volunteer was acting in good faith and within the scope of such volunteer's official functions and duties for a non-profit organization, a non-profit corporation, hospital or a governmental entity; and

2. The damage or injury was not caused by willful and wanton misconduct by such volunteer.

The immunity of the individual volunteer is modified by providing that the volunteer may be sued for a negligent act or omission involving the operation of a motor vehicle to the extent that the volunteer possesses insurance coverage. This provision is similar to existing state laws in Arkansas, Delaware and Texas.

Notably, the model act provides that the volunteer entities (the non-profit organization or corporation or the hospital) are not immune from liability to the extent that state law otherwise permits suit against such organizations. However, the intent of the model act is not to subject such organizations to liability where liability would not otherwise exist.

The other way to achieve uniformity of state laws is through House of Representatives Bill 911, introduced by Representative John Edward Porter of Illinois. H.R. 911, called the Volunteer Protection Act, has as its objective the encouragement of the states to pass laws exempting volunteers serving non-profit organizations and local governments from personal financial liability in any lawsuit against the organization. To receive the protection, volunteers must be acting within the scope of their duties, in good faith and not in a willful or wanton manner. The non-profit organization itself -- not the individual volunteer -- would answer in court to the alleged injured person. The Volunteer Protection Act allows the states substantial latitude in crafting their volunteer protection law. Those states that do enact protection laws recive a "reward" consiting of a 1% increase in Federal Social Services Block Grant funds, which are an important source of support for vital community-based programs.

Thus, H.R. 911 is an effort to stem the erosive effect of liability exposure on volunteerism by persuading the states to pass laws (or to amend laws) that exempt volunteers, as individuals from civil liability. Thus far, 20 states have enacted volunteer protection laws that would comply with the standards of H.R. 911, if that bill were to be passed by Congress.

Despite the progress that the states have made in enacting volunteer protection bills, there is still room for improvement. Fundamentally, this is a state issue, but the pressure on the states to enact volunteer protection statutes to accommodate volunteers has come from the White House or the federal legislation proposed by H.R. 911. Accordingly, then, it is up to the states to enact protective legislation for association volunteers.

In this regard the National Society's affiliated state organizations in states that don't have satisfactory protective statutes should take advantage of the window of opportunity to lobby the state legislature for such legislation. The ASOs should join coalitions that exercise their efforts for modification of protective statutes for volunteers, perhaps lobbying for the White House Model State Volunteer Service Act, which provides comprehensive protection for volunteers without imposing conditions on the associations.

This is only one example of how ASOs need not wait for a piece of accounting legislation to appear in the state legislature before they mobilize their legislative resources. There are numerous opportunities for the ASO to make its presence known and appreciated in the state legislature. State laws on taxation and laws that affect the operation of small business are only two examples of where and why accountants should be involved. Support for state volunteer protection bills is a natural extension for the ASO's political involvement.

A professional organization cannot function without the participation of volunteers. State legislation that enhances the ability of individuals to serve their professional, civic and religious organizations as volunteers deserves the support and involvement of the affiliated state organization. It is in the interest of the ASO to enhance the volunteer's participation in professional association activities.

Footnotes

(1) See, Washington Comment, "Liability of Association Volunteers" in the National Public Accountant, March 1989, pg. 10.
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Article Details
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Author:Sager, William H.
Publication:The National Public Accountant
Article Type:column
Date:May 1, 1991
Words:1175
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