CMCA Risk Management and Insurance 3

Question 1

A homeowners association hires a property manager who is later sued for discrimination in enforcing community rules. Which insurance policy would most likely cover the association's defense costs?

Accepted Answer

Employment practices liability (EPLI)

Answer

EPLI covers claims of discrimination, harassment, and wrongful termination arising from the employment relationship, which includes management decisions about employees.

Question 2

Under an 'occurrence' based liability policy, when must the triggering event happen for coverage to apply?

Accepted Answer

The injury or damage must occur during the policy period regardless of when the claim is made

Answer

An occurrence policy covers events that happen during the policy period, even if the claim is made years later after the policy has expired.

Question 3

What is the significance of a 'waiver of subrogation' endorsement in a contract between an association and a contractor?

Accepted Answer

It prevents the insurer from suing the contractor after paying the association's claim

Answer

A waiver of subrogation endorsement prohibits the insurer from pursuing the contractor to recover funds paid on a claim, which can preserve a good business relationship.

Question 4

Which of the following best describes 'loss assessment coverage' available to individual unit owners?

Accepted Answer

Coverage that pays a special assessment levied by the association due to an uninsured loss

Answer

Loss assessment coverage in an HO-6 policy pays the unit owner's share of a special assessment the association levies because its insurance was insufficient to cover a covered loss.

Question 5

An association's umbrella policy has a $5 million limit, and the underlying CGL has a $1 million limit. A judgment of $3.5 million is entered against the association. Assuming no deductible complications, how much does the umbrella policy pay?

Accepted Answer

$2.5 million

Answer

The CGL pays its $1 million limit, and the umbrella pays the remaining $2.5 million to reach the $3.5 million judgment total.

CMCA - Certified Manager of Community Associations Practice Test

CMCA - Certified Manager of Community Associations Practice Test

CMCA Risk Management and Insurance 3