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

A board member is sued personally for a decision to deny an architectural request. Which policy is designed to respond?

Answer: Directors and officers liability

D&O coverage protects board members against claims arising from their decisions and wrongful acts while serving.

An association's treasurer embezzles reserve funds. Which coverage most directly reimburses the association?

Answer: Fidelity/crime insurance

Fidelity or crime insurance covers loss of association funds caused by employee or volunteer dishonesty.

Fannie Mae guidelines generally require condominium fidelity coverage of at least which amount when the association uses certain financial controls?

Answer: Three months of total assessments on all units

Fannie Mae accepts fidelity coverage equal to at least three months of assessments when specified financial controls are in place.

Which risk management technique is used when the board installs a fence and locks the pool gate after hours?

Answer: Risk reduction (control)

Physical safeguards that lower the likelihood or severity of a loss are risk reduction.

An association permanently closes its playground because of repeated injury claims. This is an example of:

Answer: Risk avoidance

Eliminating the activity that creates the exposure is risk avoidance.

Requiring a landscaping contractor to name the association as an additional insured on its liability policy is primarily a form of:

Answer: Risk transfer

Moving the financial consequences of a loss to another party's insurance is risk transfer.

When a manager receives a vendor's certificate of insurance, which item is most important to verify?

Answer: Coverage types, limits, and policy expiration dates

Certificates must show adequate coverage types and limits that are in force during the work.