CMCA Risk Management and Insurance 5

Question 1

A condominium association experiences a data breach exposing owners' financial information stored in its management software. Which coverage would respond to notification costs and regulatory fines?

Accepted Answer

Cyber liability insurance

Answer

Cyber liability insurance specifically covers data breach response costs, regulatory fines, notification expenses, and related losses that standard CGL policies exclude.

Question 2

What is the primary purpose of requiring a vendor to provide a 'hold harmless agreement' in addition to evidence of insurance?

Accepted Answer

To contractually shift liability for the vendor's negligence away from the association

Answer

A hold harmless (indemnification) agreement is a contractual risk transfer tool that obligates the vendor to defend and indemnify the association for claims arising from the vendor's work.

Question 3

Under workers' compensation law, if an association's landscaping contractor is found to be an uninsured subcontractor, what risk does the association face?

Accepted Answer

The association may be liable as the statutory employer for the worker's injury claims

Answer

Many states make a hiring entity the 'statutory employer' of uninsured subcontractors' workers, exposing the association to full workers' compensation liability.

Question 4

An association's property is insured on an 'actual cash value' (ACV) basis. After a hail storm destroys the roof, the insurer pays $40,000 instead of the $60,000 replacement cost. The $20,000 difference most likely represents:

Accepted Answer

Depreciation subtracted from the replacement cost to arrive at ACV

Answer

ACV equals replacement cost minus depreciation; the $20,000 gap reflects the age and wear-related depreciation the insurer deducted from the replacement cost.

Question 5

Which of the following scenarios would most likely trigger coverage under an association's 'environmental liability' or 'pollution liability' policy?

Accepted Answer

Mold discovered in a common-area HVAC system contaminating multiple units

Answer

Pollution liability policies cover bodily injury and property damage from pollutants such as mold, asbestos, or chemical releases, which standard CGL policies often exclude.

CMCA - Certified Manager of Community Associations Practice Test

CMCA - Certified Manager of Community Associations Practice Test

CMCA Risk Management and Insurance 5