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

Which type of insurance covers the association for claims arising from bodily injury or property damage occurring in common areas?

Answer: Commercial general liability

Commercial general liability or CGL insurance is the primary coverage for third-party claims of bodily injury or property damage that occur on association-maintained property.

Directors and officers liability insurance protects:

Answer: Board members from personal liability for wrongful acts in their governance capacity

D&O insurance covers board members for claims alleging they made wrongful decisions, breached their fiduciary duty, or violated governing documents in their governance role.

A community association's fidelity or crime insurance policy is specifically designed to cover:

Answer: Employee theft or dishonest acts that result in financial loss to the association

Fidelity or crime insurance protects the association against financial losses caused by dishonest acts of employees, board members, or management company staff such as embezzlement or fraud.

An umbrella or excess liability policy for a community association primarily provides:

Answer: Additional liability coverage above the limits of the underlying policies

An umbrella policy extends the association's liability coverage beyond the limits of its primary policies, providing additional protection for large catastrophic claims.

Before purchasing property insurance, the association should determine the replacement cost value of insured structures. This value represents:

Answer: The cost to rebuild the structures at current construction prices without depreciation

Replacement cost value is the amount needed to rebuild the insured structure from scratch using current labor and materials, without any deduction for depreciation or market fluctuations.

An additional insured endorsement on a vendor's liability policy means:

Answer: The association is added to the vendor's policy, allowing the association to make claims directly under that policy

An additional insured endorsement extends the vendor's liability coverage to the association for claims arising out of the vendor's work, providing direct protection and a right to defense under the vendor's policy.