I served as the president of a Hindu temple for six years until last June 30. During the last year, one of the devotees who was not an officer or member falsely accused me of mismanaging Temple finances and humiliated me and my wife at a members meeting in front of more than 70 devotees. At the Annual General Meeting, he moved, and the motion was passed, to remove my good standing membership.
My wife and I have filed a defamation lawsuit against this individual. Is it legal for the Temple to hire a law firm to defend him in the lawsuit, even though the lawsuit does not mention anything about the Temple?
This is a question of state law and you should consult your own lawyer for a specific answer based on your state nonprofit corporation law and your bylaws. Most states grant discretionary authority to a nonprofit corporation to indemnify officers, directors, and frequently any other “representative” of the corporation, if such individual is sued or otherwise required to participate in a legal proceeding because of the individual’s relationship to the organization. There is usually some type of “good faith” conduct requirement to authorize indemnification, which can include the payment of legal fees, costs, settlements, and in some cases even adverse judgments. Frequently, the corporation is required by law to indemnify and pay the legal fees and costs of a defendant who prevails on a final judgment. As a practical matter, indemnification is often economically feasible only if the organization has appropriate insurance to cover the costs. Out of pocket legal costs not covered by insurance could easily bankrupt an organization without a significant reserve.
You indicate that the Temple is not mentioned in the litigation, but it sounds like your defamation claim is based primarily on his arguments to the other members of the Temple that you should be removed from office. That conduct would probably be within the ambit of protection, assuming that he is within the class that the Temple is authorized to protect. From the plaintiff’s point of view, insurance coverage for the defense is a mixed blessing. It provides coverage for a vigorous and lengthy defense, but if you actually win, it expands the resources of the defendant available to pay the verdict.