10.3 Who Is an Insured and Supplementary Payments

Who Is an Insured (Section II)

The CGL's Section II - Who Is An Insured identifies which persons and organizations have insured status. The answer depends on the named insured's form of business as shown in the Declarations. The named insured is always an insured; the form then extends status to related parties.

Employees, Volunteers, and Acquired Entities

Beyond owners and officers, the CGL automatically extends insured status to certain others:

• Employees and volunteer workers are insureds for acts within the scope of employment or duties - but NOT for BI to a fellow employee or to the named insured, and NOT for PD to property the employer/employee owns or controls.
• Employees are also not insured for professional health care services unless the policy is endorsed.
• Real estate managers acting for the named insured are insureds.
• Newly acquired or formed organizations are automatically insureds, but only for 90 days or until policy expiration (whichever is first), and not if another similar policy exists. This 90-day window is a frequent exam point.

Additional Insureds and Common Traps

Third parties (e.g., a landlord, general contractor, or municipality) gain insured status only through an additional insured endorsement (such as CG 20 10 for ongoing operations or CG 20 37 for completed operations). They are not automatically insureds under Section II.

Exam traps to remember:

• A spouse is an insured only when the business form is Individual (and only for business conduct).
• A newly acquired LLC or corporation is covered for only 90 days.
• The fellow-employee exclusion blocks coverage when one employee injures another - employee status alone is not enough.

Supplementary Payments (Coverages A and B)

The Supplementary Payments provision pays certain costs in addition to the limits of insurance, so these payments do not reduce the Each Occurrence, Aggregate, or Coverage B limits. The insurer pays these when it defends an insured. The standard CGL list includes:

• All expenses the insurer incurs;
• Up to $250 for the cost of bail bonds required because of an accident or traffic-law violation arising out of the use of a covered vehicle;
• The cost of bonds to release attachments, but only up to the applicable limit;
• Reasonable expenses the insured incurs at the insurer's request, including up to $250 per day for lost earnings.

Interest, Court Costs, and a Worked Example

Supplementary Payments also cover all court costs taxed against the insured (excluding post-judgment attorney fees), pre-judgment interest awarded against the insured on the part of the judgment the insurer pays, and all post-judgment interest that accrues after entry of judgment and before the insurer pays or deposits its share.

Worked example: The Each Occurrence limit is $1,000,000. A jury awards $1,000,000 in damages plus $40,000 court costs, $25,000 pre-judgment interest, and $250 bail bond. The insurer pays the $1,000,000 limit for damages AND the $65,250 in supplementary payments on top - because supplementary payments are outside the limit. The insured is not exposed to those extra costs even though the damages exhausted the limit.

Who Is an Insured — by Entity Type

The CGL's Section II — Who Is an Insured automatically defines insureds based on how the named insured is organized:

Newly acquired or formed organizations are covered for up to 90 days, but not as a separate named insured beyond that without endorsement.

Employee Limitations and Supplementary Payments

Employees are insureds, but with sharp limits the exam loves: an employee is not covered for bodily injury to a co-employee or to the named insured (fellow-employee exclusion), nor for damage to the employer's property.

Supplementary Payments are paid in addition to the limits of insurance and do not erode them. They include:

• All defense costs and expenses the insurer incurs;
• Up to $250 for bail bonds;
• The cost of bonds to release attachments within the applicable limit;
• Pre- and post-judgment interest;
• Up to $250 per day for the insured's lost earnings while assisting in defense.

Quick Answer: Defense costs are supplementary (outside the limit) on the standard CGL; this is a frequent contrast with eroding-limit E&O/D&O forms.

Additional Insureds by Endorsement

Beyond the automatic insureds, businesses frequently add others by endorsement, a heavily tested topic. Additional-insured endorsements (the CG 20 xx series) extend the named insured's coverage to a third party for liability arising from the named insured's work or premises. Common forms: CG 20 10 (owners/lessees/contractors — scheduled, ongoing operations) and CG 20 37 (products-completed operations). A landlord, for instance, is added as an additional insured on a tenant's CGL for liability arising out of the leased premises.

Worked example: a general contractor requires a subcontractor to name it as an additional insured via CG 20 10. When a passerby is injured by the sub's ongoing work, the GC tenders the claim to the sub's CGL and is defended/indemnified as an additional insured for the sub's negligence. Trap: the additional insured is covered only for liability arising from the named insured's work, not for the additional insured's own independent negligence (which CG 20 10 04 13 expressly limits).