Association Liability Claims Scenarios

One of the most famous cases that did not have Directors & Officers Liability cover but led to the development of Association Liability as we know it today.

It is the National Safety Council case and involved a man called Max Eise who volunteered his time to be Chairman of a Not for Profit Organisation back in the early ’90’s. He trusted those Officers reporting to him. However Max breached his duty of Care because Max was accountable along with his fellow Directors for one of the biggest frauds in Australian History to a Not For Profit Organisation (NFPO). Max was Chairman of the National Safety Council (Victoria Division)

When the Victorian division of the National Safety Council collapsed in 1990 with debts of $255 million, each of its directors, who were acting in a voluntary capacity, was sued by the Commonwealth Bank.

The collapse was largely attributable to the fraud of managing director John Friedrich and it was arguable the directors were not really to blame.  All board members settled with CBA out of court except for one the Chairman of the Board, Max Eise.

Protesting his innocence to the end, Max opted to defend the action, lost and had a $97 million judgement made against him. NCS did not have an Association Liability policy in place and Eise, whose primary asset was his home, lost everything.

The following information is offered to illustrate possible allegations which could be made against a non-profit sports club. In order to fully understand the Association Liability Policy, the policy should be read and reviewed in detail. The precise coverage afforded is subject to the terms, conditions and policy as issued.

Employment Claims

Hypothetical: Employee/volunteer is terminated and files suit alleging wrongful discharge or discrimination based upon the sex, race or age of the employee/volunteer.

 Hypothetical: Allegations are made that the club's Board refuses to appoint a minority as a director thereby causing damage to the person.

 Hypothetical: Volunteer coach files suit alleging the directors and officers wrongfully denied his request to volunteer based on rumours that he had previously been convicted of child molestation charges, which were false.

Third Party Discrimination Claims

Hypothetical: Member (player) files suit alleging discrimination after being suspended from a game shortly after the directors learn of his involvement in an armed robbery.

 Hypothetical:Member (player) files suit alleging age discrimination alleging a volunteer/employee wrongfully denied a younger members' request to participate in an older member age group.

 Hypothetical: Former Member threatens legal action after he was suspended from the club after threatening other members with violence alleging discrimination and complaints fabricated

Sexual harassment Claims

Hypothetical: Member (player), employee, or volunteer files suit alleging the coach sexually imposed upon her and that the board members were negligent in the selection of the coach and in failing to supervise his activities.

 Hypothetical: Employee alleged that General Manager used sexually suggestive language implying possible job loss if she did not submit which caused her to resign

Defamation

Hypothetical: A competing club files suit alleging the Board allowed materials to be distributed that libeled or slandered the club as a result of the communications by the organisation and its directors and officers.

 Hypothetical: Chairman of an organisation defamed a similar organisation for not spending donations appropriately with high administration costs. It was alleged it caused a large reduction in sponsors

Breach of Duty of Loyalty Claims

Hypothetical: Director, officer, employee or volunteer is sued for allegedly using the organisation as a business conduit to benefit himself.

Breach of Duty of Care Claims

Hypothetical: Directors are sued for furnishing goods, services and facilities to a person disqualified under applicable law or bylaws from receiving those goods, services and facilities.

 Hypothetical: Directors are sued for approving a plan involving large borrowings to expand services to the community that ultimately caused the Association’s demise. It was alleged they failed to ensure appropriate due diligence and to research its viability for success

Failure to Supervise

Hypothetical: Directors are sued for failing to conduct routine audits and failing to supervise the Treasurer once it discovers a dramatic shortfall in its bank account.

Hypothetical: Volunteer lost sight of patient being taken out for the day from a mental institution. Patient confronted a child and assault was attempted.

Other examples of claims can be found at these links

The Catholic Church could be held liable for Priest's actions

Make sure you are registered as a Charity or risk large fines

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