Such conflicts are not prohibited, but the director or board member has the obligation to act in good faith and inform appropriate parties of potential conflicts of interest. A checklist of recommendations to board members can help them fulfill their duties properly. To protect yourself, it is advised by ALA that you should try to find insurance protection. There is no easily ascertainable standard or accepted amount for this insurance. There are some policies designed specifically for public officials.
Some cities have liability policies which can be extended to library board members.