Non-Profit
Lawsuit Abuse Hurts Donors and Recipients
Looking for what to do next? Find out at the end of this article.
Community non-profit and volunteer organizations provide our communities with vital services that are not duplicated anywhere else – but help guarantee a better quality of life for all Americans.
Doctors volunteer to treat the poor and uninsured. Ordinary Americans help feed the hungry, clothe the indigent, transport the disabled, stand in for missing parents, fight fires, visit sick children and coach our kids. Groups raise money for a number of causes, from fighting diseases to aiding disaster victims to supporting youth sports. They are the Boy Scouts and the Girl Scouts, the Salvation Army, the Red Cross, and many others. These groups are a vital part of the country’s social fabric.
Plaintiffs’ lawyers don’t give any breaks to charitable and volunteer organizations. They pursue them just like they do private for-profit companies. Simply failing to fulfill the sometimes confusing “corporate” duties of the position is enough for directors and officers of voluntary community organizations to become the target of lawsuits.
Community non-profit and volunteer organizations provide our communities with vital services that are not duplicated anywhere else – but help guarantee a better quality of life for all Americans.
Doctors volunteer to treat the poor and uninsured. Ordinary Americans help feed the hungry, clothe the indigent, transport the disabled, stand in for missing parents, fight fires, visit sick children and coach our kids. Groups raise money for a number of causes, from fighting diseases to aiding disaster victims to supporting youth sports. They are the Boy Scouts and the Girl Scouts, the Salvation Army, the Red Cross. These groups are a vital part of the country’s social fabric.
Plaintiffs’ lawyers don’t give any breaks to charitable and volunteer organizations. They pursue them just like they do private for-profit companies. Simply failing to fulfill the sometimes confusing “corporate” duties of the position is enough for directors and officers of voluntary community organizations to become the target of lawsuits. As with small companies, most volunteer and community organizations are one lawsuit away from closing the doors. Consider the following:
“Lawsuit abuse also affects our communities,” Kevin Shivers, Pennsylvania state director for the National Federation of Independent Business, said while testifying before the Pennsylvania Senate in 2002. “The fear of personal liability due to lawsuit abuse has discouraged many citizens from serving as community volunteers and the threat of lawsuits has deterred the activities of charities and other nonprofit organizations.”
“Anyone making a decision on behalf of a nonprofit organization can be sued,” the National Council for International Visitors, a nonprofit network of community-based organizations warned its members. “In many cases, claims will be made even if there is questionable liability. The average cost to defend such lawsuits is $100,000 and the average indemnity payment for a lawsuit is at least $457,000.”
“In fact, in some respects directors and officers may be at a greater risk of liability in a non-profit than they would be in a for-profit corporation,” says a 2005 study commissioned by ALTRU, a firm that specializes in liability insurance for directors and officers of nonprofit organizations.
Lawsuits Kill Programs, Destroy Spirit of Volunteerism
“The Liability Crisis and Use of Volunteers by Nonprofit Associations,” a study conducted in 1988, before plaintiffs’ lawyers began their litigation assault, found that:
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Roughly one in 10 nonprofit organizations had to deal with the resignation of a volunteer due to liability concerns.
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One in six volunteers withheld their services because they feared being caught up in a liability lawsuit.
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One in seven nonprofit organizations had killed one or more of their programs due to their exposure to lawsuits.
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Sixteen percent of volunteer board members said that they withheld their services to a nonprofit organization because of concerns about liability.
- Between 1985 and 1988, the average increase in insurance premiums paid by nonprofits to protect themselves from liability was 155 percent. One in every eight nonprofit organizations reported an increase that exceeded 100 percent.
Cost Of Lawsuit Avoidance
Board members and officers of nonprofit organizations do have a degree of legal liability protection as long as they are acting in good faith.
But, given today’s litigation explosion, those laws might not offer sufficient coverage because all suits, even frivolous and abusive filings, will require legal fees. Just as doctors must shield themselves from liability litigation with malpractice insurance, many nonprofit directors and officers need to be insured against exposure. This is a key area of concern for FFCJ, which promotes Legal Liability Toolkits to assist non-profit organizations (and the non-lawyers who run them) in minimizing liability exposure, avoiding legal pitfalls, and choking off the steady supply of defendant targets for the plaintiffs’ bar.
In some cases, buying the insurance puts severe financial strains on the organizations and curtails the good work they can do.
No One On Board
Bernie Marcus, co-founder of The Home Depot, has said that given the growing spread of litigation, he could not have started his company today. But even in his retirement, he still spends precious resources to avoid the traps laid by plaintiffs’ lawyers. As head of a philanthropic group – the Marcus Foundation – he has seen up close the legal web that directors and officers have to negotiate simply to keep their organizations moving ahead.
“The cost [of the liability crisis] to charity organizations is even greater, because they lose their volunteer workforce as a result of bogus lawsuits,” Marcus has said. “It has become more and more difficult to find individuals to act as Board Members for those organizations, for fear of being dragged into some litigation nightmare.”
Afraid To Volunteer
In an interview with Philanthropy magazine in 2004, Marcus noted:
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“It’s easy to see business and charity as two separate spheres, and forget that abuses of the legal system have a negative impact on both. The first thing to remember is that charities, non-profits, and foundations are every bit as much in the legal cross-hairs as businesses. As a result, volunteers for non-profits are harder to recruit because of their fear of being sued.”
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“If the legal system were working the way it should, I would be able to devote much more of my energy to other philanthropic causes. But the fact is, our legal system is in such a mess that it is having a very negative impact on both the economy and our ability to help people through philanthropic and charitable organizations. We truly are in the midst of a crisis.”
- “Remember, we’re living in an era when Little League umpires are sued by parents for calling junior ‘out’ at home plate. It all adds up to a soaring liability problem that, for many organizations, has been ruinous. Without a doubt, skyrocketing litigation-related costs have come at the expense of programs that should be helping needy and needful Americans.”
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In a September 2004 column in the San Francisco Examiner, Marcus explained how volunteer organizations are affected by suits filed not against them, but against for-profit businesses: “Americans are seeing their profits and dividends dry up, and as a result are giving less to charities.”
In 1995, Sen. Mitch McConnell of Kentucky entered into the Congressional Record examples of litigation’s impact on volunteers and volunteer programs that had been compiled by the American Tort Reform Association.
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In October 1983, a man fell 90 feet while mountain climbing in California and sustained spinal injuries. A rescue team completed a risky nighttime helicopter evacuation. Two years later, the members of the team were sued by the victim, who wanted $12 million in damages. He claimed that the rescue was “reckless and negligent” and caused him to become a quadriplegic. The lawsuit was dropped. But a member of the rescue team said the lawsuit “definitely has slowed us down in getting the team into the field. Concern about liability exposure has complicated how we look at every mission.”
- “Amateur referees at softball diamonds, high school stadiums, and college field houses are finding that their decisions can trigger major-league lawsuits,” said McConnell. “A New Jersey umpire was sued by a catcher who was hit in the eye by a softball while playing without a mask; he complained that the umpire should have lent him his. The catcher walked away with a $24,000 settlement.”
Lawsuit abuse is a threat to America’s volunteer programs. Lawmakers should be educated to understand the need to establish strong legal protections for volunteers and the board members and officers who oversee the groups. The country’s rich tradition of non-profit support should not be handcuffed by predatory plaintiffs’ lawyers and jackpot-seeking plaintiffs. Our communities, families, and our health depend on it.
Now What Do We Do?
Foundation for Fair Civil Justice (FFCJ) exists to bring empowering programs and education to community and non-profit organizations.
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Please take the time to sign up for our Fairness Matters e-newsletter, which will bring you news items right to your email that tell the ongoing story about the need for legal reform by clicking here. We don’t share your email address with anyone – that’s important to us.
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Learn more about the bread-and-butter, common sense need for legal reform and how lawsuit abuse affects your community and non-profit life by listening to our “Let’s Be Fair” radio commentaries, hosted by FFCJ Senior Fellow Bob Dorigo Jones by clicking here.
Bob is a bestselling author and founder of the nationally profiled “Wacky Warning Label Contest,” which annually picks the wackiest warning labels on products to underscore the absurd lengths to which American business has to go in response to the threat of lawsuits.
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