Who Is an Insured and Supplementary Payments

Who Is an Insured

The Section II - Who Is an Insured provision automatically extends CGL coverage to people and entities connected to the named insured, even though they are not listed on the declarations. The persons/entities that qualify depend on the named insured's business form shown in the declarations (individual, partnership, joint venture, LLC, corporation, or trust).

Automatic insureds by entity type

In ADDITION, the following are insureds regardless of entity form:

• 'Volunteer workers' - only while performing duties related to the conduct of your business.
• 'Employees' (other than executive officers) - only for acts within the scope of employment or while performing duties related to the business. Employees are NOT insured for BI to a co-employee or to the named insured, nor for damage to the insured's property they own/control.

Newly acquired or formed organizations

An organization the named insured newly acquires or forms (other than a partnership, JV, or LLC) is automatically an insured, but only:

• Until the end of the policy period OR the 90th day after acquisition/formation, whichever is earlier; and
• There is no coverage for occurrences before the date the entity was acquired or formed.

This automatic 90-day window is heavily tested - the answer is 90 days or end of policy period, whichever comes first. After that, the new entity must be added by endorsement. Coverage A and B do NOT apply to BI/PD or offenses arising out of a separate policy issued to the new organization.

Additional insureds

Third parties such as landlords, lessors, or project owners are commonly added as additional insureds by endorsement (for example, CG 20 10 Owners, Lessees or Contractors - Scheduled Person/Organization, and CG 20 37 for completed operations). The additional insured generally gets coverage only for liability arising out of the named insured's work or premises, not for its own sole negligence. Worked point: a general contractor often requires a subcontractor to name it as an additional insured via CG 20 10 (ongoing operations) AND CG 20 37 (completed operations) to be covered after the job ends.

Employees, co-employee suits, and the separation of insureds

The separation of insureds condition (Section IV) states that, except for the limits of insurance and the duty to defend, the insurance applies as if each named insured were the only named insured and separately to each insured against whom a claim is made. This is why one insured can sometimes sue another and still find coverage - but it is limited by the employee-injury exclusions.

• An employee is an insured only for acts within the scope of employment.
• Coverage A excludes bodily injury to a co-employee in the course of employment and to the named insured's employees generally (workers comp territory).
• An employee is NOT insured for damage to property the insured owns, occupies, rents, or controls.

These rules keep the CGL from overlapping with workers compensation while still protecting the entity for third-party suits an employee triggers.

Supplementary Payments

Supplementary Payments are amounts the insurer pays in addition to the applicable limit of insurance - they do NOT reduce the limits available to pay damages. They apply to any claim or suit the insurer defends. The standard list (Coverages A and B) includes:

• All expenses the insurer incurs.
• Up to $250 for bail bonds required because of an accident or traffic violation arising out of a covered vehicle (the insurer is not obligated to furnish the bond).
• The cost of bonds to release attachments, but only up to the applicable limit (the insurer need not furnish the bond).
• All reasonable expenses the insured incurs at the insurer's request, including up to $250 per day for loss of earnings due to time off work.
• All court costs taxed against the insured (not including attorneys' fees or post-judgment-related items beyond what is listed).
• Pre-judgment interest awarded against the insured on the part of the judgment the insurer pays.
• Post-judgment interest that accrues after entry of the judgment and before the insurer pays, offers, or deposits its share.

Key supplementary-payment exam points

Memorize these specific dollar figures and limit behaviors - they recur on the state exam:

Critical trap: because supplementary payments are paid above the limit, a $1,000,000 judgment plus $30,000 of defense costs and interest means the insurer pays $1,030,000, not a net amount inside the $1,000,000. Defense costs erode the limit only on certain professional/'eroding-limit' forms - the standard CGL does NOT erode limits with defense.