10.3 Who Is an Insured and Supplementary Payments

Who Is an Insured

The Who Is an Insured section of the CGL automatically defines the protected parties based on how the named insured is organized in the declarations. The named insured is the entity that contracts with the insurer; other parties are insureds only as this section grants.

Coverage by Business Structure

The correct entity type drives who is protected, a common multiple-choice distinction.

Employees, Volunteers, and New Entities

Employees and volunteer workers are insureds for acts within the scope of their employment or duties. However, they are not insured for:

• Bodily injury to a fellow employee or to the named insured
• Injury arising from professional health care services they render
• Damage to property owned by or in the care of the employee

A newly acquired or formed organization is automatically an insured for up to 90 days (or end of the policy period, whichever is first), if the named insured has majority interest.

Additional Insureds

Beyond automatic insureds, parties can be added by additional insured endorsements (for example, CG 20 10 for owners/lessees by written contract). A landlord, general contractor, or vendor often requires this to be protected for liability arising out of the named insured's operations. The exam tests that an additional insured is added by endorsement, not automatically included.

Supplementary Payments

Supplementary Payments are the single most tested benefit distinction in the CGL. The insurer pays these amounts in addition to the limits of insurance - they do not reduce or erode the Each Occurrence or aggregate limits. This makes defense and related costs effectively unlimited from the insured's perspective.

What Supplementary Payments Include

For a claim or suit the insurer defends, it will pay:

• All defense costs the insurer incurs (attorney fees, investigation).
• The cost of bail bonds up to a stated amount (commonly $250) for accidents related to the covered vehicle/incident - no obligation to furnish the bond.
• The cost of bonds to release attachments within the limit of insurance.
• Reasonable expenses the insured incurs assisting the defense, including up to $250 per day for lost earnings.
• Taxed court costs charged against the insured.
• Pre-judgment interest awarded, and post-judgment interest on the full judgment until the insurer pays/tenders its limit.

Worked Supplementary Payments Example

A covered suit results in a $1,000,000 judgment that equals the each-occurrence limit. The insurer spent $120,000 defending the case and $15,000 of post-judgment interest accrued before it paid.

Because Supplementary Payments are outside the limits, the insurer pays the full $1,000,000 judgment plus $120,000 defense plus $15,000 interest = $1,135,000 total. The defense and interest do not eat into the policy limit.

When the duty to defend ends

The insurer's duty to defend is broad but not perpetual. The CGL states the insurer has no duty to defend suits the policy does not cover, and the duty ends when the applicable limit of insurance is exhausted by the payment of judgments or settlements. This interacts with Supplementary Payments: post-judgment interest is paid only until the insurer pays, offers, or deposits the part of the judgment within its limit. Once the limit is tendered, the insured must fund any further defense - a reason large accounts buy higher limits or a defense-outside-limits umbrella.

The 90-day newly-acquired-organization trap

A classic exam item: a newly acquired or formed organization is an automatic insured for only the shorter of 90 days or the end of the policy period, and only if the named insured maintains majority ownership. Coverage does not extend to injury or damage that occurred before the entity was acquired or formed, and there is no automatic coverage for a newly acquired entity that is already an insured under a similar other policy. Producers must endorse newly acquired subsidiaries onto the schedule before the 90 days lapse.

Additional insured vs. named insured - rights differ

An additional insured generally is not entitled to the policy's full limits beyond what the endorsement grants, does not control the policy, and is covered only for vicarious or operations-related liability tied to the named insured - not for its own independent negligence. Distinguishing these three tiers of insured is a reliable exam point.

Worked who-is-an-insured scenario

A general contractor (GC) requires its electrical subcontractor to add the GC as an additional insured for ongoing operations (CG 20 10) and to make the sub's coverage primary and noncontributory (CG 20 01). An apartment tenant is injured by faulty wiring the sub installed. The GC tenders the claim to the sub's CGL: because the injury arises out of the sub's ongoing operations, the additional-insured endorsement responds, and the primary-and-noncontributory endorsement means the sub's policy pays first without forcing the GC's own insurer to contribute.

Had the injury instead resulted from the GC's own independent negligence unrelated to the sub's work, the additional-insured grant would not respond, because it covers only liability arising from the named insured sub's operations. This interplay of additional-insured scope, primary-and-noncontributory wording, and the limits-sharing rule is among the most heavily tested commercial-liability mechanics, reflecting how real construction contracts allocate risk down the contractual chain.