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This example illustrates a problem with insurance. How should it be handled? What other issues may be present? Some of the issues are reviewed at Discussion. In this skit, Jim is Barbara's attorney; Barbara is a volunteer for a nonprofit corporation. |
Example
Jim: Hello, Barbara, thank you for stopping by.
Barbara: Am I really being sued?
Jim: Yes, Bobbie Bushmat's parents have filed a lawsuit against you, claiming that you drove the bus negligently on the way to the baseball game and that your negligence caused the accident.
Barbara: I guess it's a good thing I have auto insurance.
Jim: Well, that's one of things I wanted to talk to you about. Many standard auto insurance policies have exclusions, kinds of accidents that aren't covered. I'm afraid that like a lot of auto policies, yours had an exclusion for passengers where you are receiving payment for driving people somewhere.
Barbara: But I wasn't being paid to drive the kids to the ballgame.
Jim: You were reimbursed for the miles you drove. That counts as "payment" under your auto policy.
Barbara: So my auto policy doesn't help at all?
Jim: I'm afraid not.
Barbara: The Ship Creek Softball Association, has insurance, doesn't it?
Jim: No, They don't have any insurance at all.
Barbara: What am I going to do? I can't afford to pay a lawyer to defend me.
Jim: Well, there's one thing you could do, but it's not very nice.
Barbara: I'm not feeling very nice.
Jim: You could sue the members of the board of directors of the Ship Creek Softball Association for failing to obtain insurance...
Auto insurance policies frequently contain exclusions (risks not covered by the policies) for business usage. The definition of business use can vary. The definition here is not the only one.
A nonprofit corporation should always make certain that either the nonprofit's insurance covers the volunteers and their vehicles or that volunteers are required to obtain endorsements providing coverage for this kind of use. See the discussion of insurance under risk management.
A nonprofit corporation that fails to provide insurance one way or another jeopardizes itself in several ways. It may itself be sued by persons like Bobbie Bushmat under a theory of vicarious liability or negligent selection of a volunteer driver and, without insurance, the nonprofit may not be able to defend itself, let alone pay any damages. And, if a person like Bobbie Bushmat sues a volunteer, and the volunteer doesn't have insurance, the volunteer is likely be deeply unhappy. That may well transform itself into a lawsuit against the nonprofit or its individual directors. Note that because an auto accident is involved the Federal Volunteer Protection Act of 1997 provides little comfort.
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