Protect the mission. And the board.

California's board immunity comes with an insurance condition

California has its own shield for unpaid directors and officers, and it only works if the corporation carries insurance. Corporations Code 5047.5 says no cause of action for monetary damages arises against a person serving without compensation as a director or officer of a 501(c)(3) or 501(c)(6) nonprofit over a negligent act or omission that was within the scope of board duties, in good faith, believed to be in the corporation's best interest and an exercise of policymaking judgment.

Subdivision (e) adds the condition. The corporation must maintain a liability insurance policy, the claim must be one that can also be made against the corporation, and the policy must apply to it. The coverage must be at least:

• $500,000 for a corporation with an annual budget under $50,000.
• $1,000,000 for a corporation with an annual budget of $50,000 or more.

The statute lists what it does not cover: self-dealing, conflicts of interest, suits by the Attorney General, intentional, wanton or reckless acts, gross negligence, and fraud, oppression or malice. The section does not apply to a director or officer who is compensated by the corporation in another capacity, such as an employee, and nothing in 5047.5 limits the nonprofit's own liability.

My routine for California clients is to check the operating budget against the liability limit at every renewal, especially the year a growing group passes $50,000. More detail for boards is on my California board D&O page.

Youth programs: California's training and background check rules

If your California organization's administrators or employees are mandated reporters under Penal Code 11165.7(a)(7), which covers people working at youth centers, youth recreation programs and youth organizations, Business and Professions Code 18975 treats you as a youth service organization. Here is what the section requires:

• Training. Administrators, employees and regular volunteers complete training in identifying and reporting child abuse and neglect. The requirement may be met with the online mandated reporter training from the Office of Child Abuse Prevention in the State Department of Social Services.
• Background checks. The same people undergo a check under Penal Code 11105.3 to identify and exclude anyone with a history of child abuse.
• Who counts as a regular volunteer. Anyone 18 or older with direct contact with or supervision of children for more than 16 hours a month or 32 hours a year.
• Written policies. Reporting suspected abuse to people or agencies outside the organization, and, as far as possible, at least two mandated reporters present whenever administrators, employees or volunteers are in contact with or supervising children. One-to-one mentoring programs have a narrow exception.

Subdivision (d) lets an insurer, as part of its loss control program, ask for information showing compliance before writing your liability coverage, so I collect those records before going to market. Expect the same questions for abuse and molestation coverage.

Keep every old policy, too. Under Code of Civil Procedure 340.1, there is no time limit to sue over childhood sexual assault that occurs on or after January 1, 2024. That includes suits against an organization that owed the child a duty of care when its wrongful or negligent act was a legal cause of the assault, and a proven cover-up can bring up to treble damages. A claim could reach back to whatever policy was in force years earlier. Rules outside California vary by state.