Non-Profit Lawsuits: The Most Common Cases & How to Avoid Them

insurance for new york nonprofitsA handshake and a wink will not cover you in court. No matter how small a transaction is, it comes with the risk of a contract dispute.

Take this scenario, for example: Your non-profit needs a website. You hire a web designer. The web designer sends an invoice and it’s more than you intended to pay. Fees were added for additional website features. But you did not ask for these features, and your non-profit could not afford to pay the designer the full amount. When the designer is not paid, he files a lawsuit against your non-profit. But you cannot afford to defend yourself in court. You are forced to close the doors to your non-profit just to settle outside of court.

The most common lawsuit for any company, non-profit or for-profit, is a contract dispute. But unlike other companies, non-profits can be quickly shut down because of a lack of funds.

The best way for a non-profit to avoid a lawsuit over a contract dispute is to put everything in writing. That means not only including all of the terms of the transaction, but initials from each party to prove that the terms are clearly understood and agreed upon. And unless you are a lawyer, don’t try to create contracts on your own. Rely on trusted legal counsel to handle contract matters.

A contract doesn’t have to be complex, but you should have a lawyer’s guidance. And as long as everything is clearly outlined and initialed, it is a valid contract by law.

Employment-related claims are another common legal matter for businesses both non-profit and for-profit. But as the Nolo legal network notes, “Unfortunately, the very fact that non-profits are financially strapped often leads them to impose on their employees in ways that are quite illegal.”

So here’s the scenario: You have a happy employee who goes above and beyond. His or her overtime hours are accidentally overlooked. One day you are forced to let that employee go because of unforeseen obstacles. The employee is so disgruntled that he or she decides to file a wage-and-hour dispute.

The last lawsuit that is notorious for bringing down non-profits is a personal injury lawsuit. This can be as simple as an employee or visitor tripping over an electrical cord inside your organization’s building and breaking an ankle. All of a sudden, your non-profit is responsible for paying all of the medical bills as well as compensating the individual for their pain and suffering.

You can’t always predict when a situation like one of these will arise and your non-profit is left responsible. The only way to protect your non-profit is to purchase insurance. Not sure why type of insurance you need or how much coverage? We can help.

Photo via Constantine Pankin / Shutterstock

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