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volunteers from being sued or being named in a lawsuit. Instead, the Volunteer Act
provides an affirmative defense to liability, which lawyers for the volunteer would
raise in the course of the litigation. Although a volunteer might be named as a
defendant in the initial stages of the case, it is very likely that the claims would be
dismissed early in the process, assuming all the criteria of the Volunteer Act are
satisfied.

The Volunteer Act does not protect the nonprofit organization itself from
liability for harms suffered in the course of its activities. The organization may be
held responsible for the acts or omissions of the persons working for it, even if the
persons cannot be held individually liable. Finally, the Volunteer Act does not
prevent nonprofit organizations from suing their volunteers for misconduct. Thus,
if an officer or director harms the organization in some way, the organization still
can bring suit against such officer or director without the protection provided by
the Volunteer Act being invoked.

CHAPTER 21. Directors’ and Officers’ Insurance

A nonprofit corporation may purchase liability insurance on behalf of its
directors and officers to cover certain claims. A directors’ and officers’ insurance
policy (“D&O insurance”) will generally provide coverage for liability claims against a
director or officer whether or not the corporation indemnifies that individual.
Directors and officers will often want the corporation to provide D&O insurance
even if the corporation’s articles of incorporation or bylaws have generous
indemnification provisions.

D&O insurance provides three types of coverage: (1) coverage for the
corporation’s directors and officers when the corporation does not indemnify them;
(2) coverage for the corporation for amounts the corporation actually pays directors
and officers for indemnification; and (3) coverage for claims brought against the
corporation. D&O insurance policies usually cover defense costs as well as
liabilities arising from individual officers or directors allegedly committing “wrongful
acts,” which will be defined in the policy. Most D&O insurance policies exclude
claims based on:

y Dishonest, fraudulent, or criminal acts. Even if the policy does not
specifically exclude coverage for claims based on such conduct, most
definitions of “wrongful act” specifically include only negligent conduct;

y Fines, penalties or punitive damages;

WASHINGTON NONPROFIT HANDBOOK -59- 2018