CMCA - Certified Manager of Community Associations Risk Management and Insurance Questions and Answers

Question 1

A visitor slips and falls on a wet common area sidewalk, breaking their leg. They sue the association for medical expenses. Which insurance policy is designed to respond to this type of claim?

Accepted Answer

Commercial General Liability (CGL)

Answer

Directors & Officers (D&O) Liability

Answer

Fidelity Insurance

Answer

Workers' Compensation

Question 2

A homeowner sues the Board of Directors, alleging they acted negligently by failing to properly maintain the common area drainage system, which led to water damage in the homeowner's unit. Defense against this type of lawsuit would primarily be covered by which policy?

Accepted Answer

Directors & Officers (D&O) Liability Insurance

Answer

Property Insurance

Answer

Commercial Umbrella Insurance

Answer

Fidelity Bond

Question 3

In the context of community association risk management, purchasing an insurance policy is the most common example of which risk management strategy?

Accepted Answer

Risk Transfer

Answer

Risk Avoidance

Answer

Risk Reduction

Answer

Risk Retention

Question 4

During an annual audit, it is discovered that the association's bookkeeper, who is a volunteer homeowner, has been writing fraudulent checks to themselves from the association's operating account. Which type of insurance policy is specifically designed to cover this loss?

Accepted Answer

Fidelity Bond/Crime Insurance

Answer

Commercial General Liability

Answer

Errors & Omissions

Answer

Property Insurance

Question 5

An association's property insurance policy includes a "waiver of subrogation" clause. What is the primary function of this clause?

Accepted Answer

It prevents the insurance company from suing a negligent homeowner to recover funds paid for a claim.

Answer

It waives the association's responsibility to pay the policy deductible.

Answer

It prevents the insurance company from increasing premiums after a claim is filed.

Answer

It requires disputes between the association and the insurer to be settled by arbitration instead of in court.

Question 6

A fire in the community clubhouse causes $75,000 in damages. The association's property insurance policy has a replacement cost provision and a $5,000 deductible. Assuming the loss is fully covered, how much will the insurance company pay for the claim?

Accepted Answer

$70,000

Answer

$75,000

Answer

$5,000

Answer

$80,000