United States: Indemnification Of Trustees, Officers And Employees: What Do You Have? What Should You Have?

Last Updated: December 11 2013
Article by Warren J. Casey

The chairman of the board of trustees has lunch with a prospective trustee, or the board is looking to bring in a new executive director, and the candidate asks, "What are my indemnification protections?" How do you respond?

The articles of incorporation or bylaws of most nonprofit organizations include an "indemnification" section. The indemnification section often was not given considerable thought when first included in the document, and probably was given even less as time has gone on. It is sometimes mistakenly referred to as "boilerplate."

Indemnification generally refers to an obligation of the organization to pay an ultimate liability and associated expense incurred by a trustee, officer or employee who becomes the subject of a claim and for whom indemnification under the organization's governing documents is to be provided.

Indemnification provisions are an important protection for trustees and officers and should be regularly reviewed. There are numerous questions and issues regarding to whom, and for what, indemnification should apply.

Take, for example, a situation in which one or more trustees or officers become subject to a claim that a guest of the organization was injured while on its premises. Often in such a case, third-party insurance would cover the personal injury claim; in addition, the statutes of the particular jurisdiction may expressly "exculpate" trustees and officers from liability for such a claim. But other third-party claims might not be covered by insurance or by any "exculpation," such as if an individual is accused by a third party or by a governmental agency of having engaged in some particular wrongdoing or misconduct. Whereas it is possible the organization has directors' and officers' liability insurance, more likely there exists no third-party insurance coverage or exculpation for such claim, in which case indemnification rights in favor of the trustee, officer or employee are very much at issue.

Most organizations provide for "mandatory" indemnification of trustees and officers and, more often, "discretionary" indemnification in favor of employees. That way, the board of trustees can determine whether indemnification of a particular employee (as compared with a trustee or officer) who is the subject of a claim is warranted under the circumstances. But what of an executive director? Is that person entitled to mandatory indemnification if the position of executive director is not an "officer" position under the organization's bylaws? And if indemnification is discretionary (rather than mandatory) for trustees or officers, should you, as a trustee or an officer, be concerned? These are issues to consider when reviewing the indemnification provisions of the organization's governing documents.

Further, even when indemnification protection exists, the statutes of all jurisdictions nevertheless require the proposed indemnitee to satisfy a particular standard of conduct -- generally, that the person acted in good faith and in a manner that he or she reasonably believed to be in (or not opposed to) the best interests of the organization and, in a criminal proceeding, that the individual had no reason to believe the conduct was unlawful. So indemnification rights are not automatic; they require, even under mandatory indemnification provisions, the individual to have met a particular standard of conduct.

In addition, indemnification is distinct from "advancement of expenses." For example, a trustee or an officer becomes subject to a particular claim, complaint or government proceeding, and at the very outset, the individual wishes to hire a lawyer to defend the claim. Indemnification rights, by themselves, typically do not apply to the expenses incurred by an individual in his or her defense, at least until there is an ultimate determination of liability on the underlying claim. This is why many indemnification provisions also include provisions for advancement of expenses. Such provisions may be mandatory or discretionary and, in any case, generally require the individual to deliver to the organization an "undertaking" to repay the organization any "advanced expenses" if it is ultimately determined that the individual is not entitled to indemnification. But an organization should be very cautious with advancement rights, because the particular circumstances of the claim, such as alleged corporate wrongdoing, might militate against mandatory advancement of expenses.

Other issues that should be considered in reviewing indemnification/provisions include:

  • What types of proceedings are covered by the organization's indemnification protection? Are investigations, arbitrations and governmental proceedings covered, in addition to civil court actions and criminal court actions?
  • What if the particular "proceeding" is brought by the individual against the organization?
  • Do the governing documents provide indemnification protection to "former" trustees, officers or employees, after the individual has left the organization and no longer is a current trustee, officer or employee?

The key takeaway is that your organization's indemnification provisions need to be regularly reviewed and should never be considered boilerplate.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.