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Board Members May Be Legally Responsible for Organization's Negligence

Tennessee lawsuit highlights liability of nonprofit board. members

Key point: Officers and directors of nonprofit organizations may be legally responsible for gross negligence in the management of the organization's finances, property, and affairs.

• The Supreme Court of Tennessee issued an important decision addressing the liability of the officers and directors of nonprofit boards. The facts of this case can be summarized as follows. All present and former members of the board of a nonprofit nursing home were sued by persons who had purchased life-time care agreements with the facility. These individuals paid a substantial entrance fee and a monthly maintenance fee. In exchange, the corporation was required to provide the resident with care for life, including care in a skilled nursing facility if needed, at no additional charge. Upon the death of a resident, the corporation was obligated to refund 50 percent of the entrance fee to the resident's ...

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  • September 1, 1995

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