Why Sports Clubs and Community Groups Need Association Liability Insurance

Most sports clubs, charities and community groups rely on volunteers to run their committees and make decisions. These roles can be rewarding, but they also come with responsibilities.

In New Zealand, the Incorporated Societies Act 2022 sets out duties for officers and committee members. They must act in good faith, act in the best interests of the organisation, and take reasonable care when making decisions.

Association Liability Insurance helps protect the organisation and the people who manage it if a claim, complaint, investigation or legal issue arises.

A common myth - “But I’m just a volunteer”

Many volunteers assume the club will protect them, that incorporation is enough, or that they cannot be sued because they are unpaid. Unfortunately, this is not always the case.

A claim can be made against the club or society, individual committee members, officers such as the President, Chairperson, Secretary or Treasurer, trustees, or others acting in management roles.

Even if a claim is not true, it can still cost a lot to respond to lawyers, employment issues, privacy complaints or investigations. Association Liability Insurance can help pay these costs and protect committee members’ personal finances.

What Does Association Liability Insurance Cover?

Cover varies between insurers, but Association Liability policies commonly help with:

·       Legal defence costs.

·       Claims about management or committee decisions.

·       Employment disputes.

·       Privacy breaches or complaints.

·       Defamation claims.

·       Theft or fraud by trusted people.

·       Regulatory investigations.

For many clubs and groups, the most useful part of this insurance is that it can help pay for a lawyer as soon as a problem starts.

Association Liability and Public Liability Are Different

Many clubs have Public Liability Insurance, but this does not cover every risk. Public Liability and Association Liability protect against different types of problems.

Public Liability Insurance

Public Liability generally responds when someone is injured or someone else’s property is damaged because of the club’s activities.  For example:

·       A spectator trips at a club event.

·       A ball damages a parked car.

·       A volunteer accidentally damages someone else’s property.

Association Liability Insurance

Association Liability is different. It is designed to help when the club, committee or officers are challenged over how the organisation has been managed. For example:

·       A complaint about a committee decision.

·       An employment dispute.

·       A privacy or defamation claim.

·       An allegation that officers failed to meet their duties.

·       A regulatory investigation.

Most clubs should consider both types of cover because they deal with different risks.

Real Life Scenarios

Treasurer Misappropriates Club Funds

A sporting association found that its Treasurer had taken about AUD $70,000 from club accounts. With extra costs included, the total loss was more than AUD $80,000.

Lesson: Even trusted people can make poor choices, so good controls and theft protection matter.

Defamation Allegation Following Committee Dispute

A committee member sent an email explaining why they had resigned. The organisation’s manager said the comments were defamatory, which led to legal action and a settlement of about AUD $100,000, including legal costs.

Lesson: Committee disagreements can quickly become expensive legal issues.

Governance Dispute Following Removal of a President

An association removed its president after a vote of no confidence. The former president said the process was unfair and made a claim against the organisation and individual office holders.

Lesson: Clubs need to follow their rules carefully, especially when making difficult decisions.

Committee Responsibilities Are Growing

Committees are now expected to think about more than money and day-to-day operations. They also need to consider how the organisation is run, how complaints are handled, and how members and volunteers are supported.

Common areas of responsibility include:

• Organisational culture.

• Athlete and member wellbeing.

• Complaint handling.

• Transparency and accountability.

• Ethical leadership.

A club can face complaints not only for what it did, but also for what it failed to do.

Association Liability Insurance can help defend the club and its committee members if these concerns lead to a claim or investigation.

Questions Every Committee Should Ask

At your next meeting, ask:

✓ Do we have Association Liability Insurance?

✓ Does the cover extend to committee members, officers and volunteers?

✓ Are defence costs covered?

✓ Does the policy include employment practices liability?

✓ Is theft or fraud protection included?

✓ Does our constitution allow protections for officers?

✓ Do we require dual approval for payments and banking transactions?

Final Thoughts

Most volunteers do their best, but mistakes, disputes and complaints can still happen. Today’s committees are expected to manage issues such as governance, privacy, employment matters, wellbeing and finances.

Association Liability Insurance gives clubs and community groups an important layer of protection. It can help pay legal defence costs and protect the organisation, committee members and volunteers when decisions or actions are challenged.

Disclaimer: This article is general information only and is not legal or insurance advice. Cover differs between insurers, so clubs should review policy wording with their insurance broker or adviser.