Key Terms: Risk Management

Question 1

Actual cash value (ACV)

Answer 1

The depreciated value of an item.

Question 2

Advertising injury

Answer 2

Advertising injury provisions in CGL (comprehensive general liability) include language providing
coverage to the community association with respect to damages resulting in “misappropriation of advertising ideas or style of doing business” or “infringement of copyright, slogan or title.”

Question 3

Agreed amount endorsement

Answer 3

Provides for an agreed upon limit of property insurance

Question 4

Coinsurance

Answer 4

Coinsurance is a standard element in most property policies that obligates the insured to maintain certain limit of property insurance based on a stated percentage

Question 5

Common declarations

Answer 5

This section of the policy is like the title page of a book. It typically includes such information
as the name and address of the insured and the period of coverage

Question 6

Common policy conditions

Answer 6

These are the basic provisions that apply to all insurance coverages in the package. For example, when to file proof of a loss or what happens when a premium is not paid

Question 7

Contingent liability

Answer 7

Covers the value of any undamaged portion of a building which may have to be replaced because
of building laws

Question 8

Contractual transfers

Answer 8

This involves entering into a contract that will, among other things, transfer the community association’s legal responsibility for any loss.

Question 9

Cross liability

Answer 9

Cross liability allows an owner to bring a claim against his or her community association. This coverage is in the owner’s interest. It is standard for owners to be insured in liability insurance for condominiums and cooperatives, while planned communities must see to it that this concept is present in their liability coverage

Question 10

Directors and officers liability insurance

Answer 10

This insurance is designed to pay for damages arising from wrongful acts
that do not lead to property damage, bodily injury, advertising injury, or personal injury.

Question 11

Direct writer system of insurance

Answer 11

Comprised of employees of a single insurance company who only place the insurance of that company

Question 12

Electronic data processing (EDP)

Answer 12

This insurance may be needed for computer equipment, networks, websites, security systems, protection from hackers, and similar information technology exposures

Question 13

Endorsements

Answer 13

Endorsements expand, contract or clarify coverage.

Question 14

Exposure avoidance

Answer 14

This involves avoiding the circumstances that would expose the community association to
certain type of loss

Question 15

Extra demolition

Answer 15

Covers the value of demolishing any undamaged portion of a building.

Question 16

Fidelity insurance

Answer 16

This insurance protects against employee dishonesty which may lead to the theft of money,
securities, or property

Question 17

HO-1,-2, -3, -4, -5, -6 policies:

Answer 17

HO-1, HO-2, HO-3, and HO-5 refer to policies for owner-occupied units. HO-4 is a
tenant’s policy. HO-6 is a policy for a condominium or cooperative unit owner

Question 18

Liability exposure to loss

Answer 18

Liability losses arise when a person or entity threatens or actually brings a legal claim
against the community association, its members or others whom it must indemnify by contract (such as a
management company)

Question 19

Personal injury (PI)

Answer 19

Injury arising from libel, slander, false arrest, invasion of privacy, wrongful entry, or malicious
prosecution

Question 20

Personal property

Answer 20

Inventory, furniture, fine arts, equipment, supplies, machinery, electronic data processing (EDP),
and valuable papers and records

Question 21

Policy forms

Answer 21

Policy forms define the type of insurance coverage provided, for example, property, liability and boiler
and machinery. The forms also define how comprehensive each type of coverage is—what is included and what is excluded

Question 22

Property exposure to loss

Answer 22

Property losses can be to tangible community association property (buildings and contents) or to intangible association property (information, proprietary Web site, etc.)

Question 23

Real property

Answer 23

Real property includes buildings, land, and the newest type of property exposure.

Question 24

Risk financing

Answer 24

The process of obtaining resources to pay for any financial consequences of accidental loss

Question 25

Segregation of exposure

Answer 25

Segregation of exposures involves the duplication or separation of property exposures to
loss

Question 26

Third-party insurance

Answer 26

Liability coverage purchased by an insured (the first party) from an insurer (the second party)
for protection against claims of another (third party).

Question 27

Waiver of subrogation

Answer 27

The insurer waives its right to require the association to transfer recovery rights to the insurer
regarding unit owners