Board members who serve without compensation may be covered by charitable immunity in some states for certain actions, however, charitable immunity will not prevent a lawsuit from being filed against them – or the nonprofit. In such cases, the nonprofit — or the board member — will be required to hire legal counsel to argue that the case should be dismissed, which is likely to cost several thousands of dollars. D&O insurance is the tool many organizations use to shift the financial burden to an insurance carrier to avoid having to foot the legal bill. Similarly, indemnification may be available to pay back a board member who has expended his/her own funds to defend a lawsuit. However, if D&O insurance is in place, often there is no need for the charity to expend its own funds to pay back the board member.
