Below are six common insurance terms that routinely come up while serving on a HOA board of directors.
- Indemnity – the insurance company indemnifies, or compensates, the policyholder in the event of certain losses only up to the policyholder’s interest.
- Insurable interest – the policyholder generally must directly suffer a loss. This legal concept requires that the insured have a “stake” in the loss or damage to the property insured.
- Utmost good faith – the policyholder and the insurance company are bound by a good faith bond of honesty and fairness. Material facts must be disclosed.
- Subrogation – the insurance company acquires legal rights to pursue recoveries on behalf of the policyholder; for example, the insurance company may sue those liable for the insured’s loss.
- Causa proxima or proximate cause – the cause of loss, also known as peril, must be covered under the insurance policy, and the claim cause must not be excluded
- Mitigation – In case of any loss, the policyholder must attempt to keep loss to a minimum, as if the asset was not insured.
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