Nonprofit Genie (FAQs) | Insurance

The following case studies are provided to give the reader an idea of the types of lawsuits we have handled for our nonprofit organization members and their boards of directors. The reader should remember that the vast majority of claims of this nature are lodged by disgruntled employees. We have provided a variety of different scenarios below to give a broader perspective on the type of claims to which board members are exposed.

Double trouble

When Elisa complained to Joe, the executive director, that her manager, Roger, was sexually harassing her, Joe told her he would look into it; but he was overwhelmed with work and put off any investigation. Elisa complained again, this time in writing. Once again, Joe did not take action. Elisa quit and threatened to sue. Now, faced with a possible lawsuit, Joe investigated the allegations and determined that they were true. He fired Roger. But, that is not the end of the story.

Elisa sued Joe and the nonprofit organization and its board of directors for allowing sexual harassment in the workplace and failing to investigate in a timely manner. She argued that she was constructively terminated. To add to the misery, Roger also sued for wrongful termination. He alleged that his behavior had been tolerated for many years. and that he was given no warning that his behavior was no longer appropriate.

Misrepresentation of market forces?

A small nonprofit housing advocacy group helped a group of twenty low-income families obtain government-subsidized loans to purchase a group of low-income condominiums. Not long after the purchases were completed, the real estate market took a serious downturn. Many of the condos were worth less than the outstanding amount of the loans. Several of the homeowners sued the nonprofit and its board of directors for misrepresentation of the benefits of home ownership and failing to warn them of the possible loss in home value.

Disability or inconvenience?

Sarah worked as a counselor at a group home for teens. She took insulin regularly for diabetes, but from time to time fainted while on duty. The nonporfit for which she worked accommodated her schedule so that she could take her insulin shots in a timely manner.

However, Sarah was also a part-time student and during the second semester of the year her class schedule dramatically changed. She was not able to work the hours previously arranged, and the nonprofit was not able to accommodate her new hours. She was terminated. Sarah sued the nonprofit organization and its board of directors for discrimination under the ADA, alleging that the real reason for her termination was her diabetes

Legitimate fundraiser or scam?

The board of directors of the nonprofit was aware that nearly all of the organization's funds were coming from services provided by a for-profit fundraiser, but they never thought to review the contract with the fundraiser or question the fee being paid to the fundraiser.

The Attorney General sued the board of directors of the nonprofit, and the nonprofit organization itself, alleging improper fiduciary oversight and misuse of funds. The lawsuit alleged that the for-profit fundraising organization was fraudulently representing that the funds would be used for drug rehabilitation and education when, in fact, 90 percent of the proceeds were going to the for-profit fundraiser. The Attorney General alleged that the board of directors should have been aware of the fraudulent actions of the for-profit fundraiser and should not have permitted the nonprofit organization to take part in the scheme.

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Reprinted with permission from The Nonprofits' Insurance Alliance of California (NIAC), a charitable nonprofit insurance pool owned and operated by 501(c)(3) nonprofits in California. More information about the property and liability coverages and other services available through NIAC is available on their website at http://www.niac.org or by contacting them at P.O. Box 8507, Santa Cruz, CA 95061 or by phone at (800) 359-6422.

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