3.3 CGL Who Is an Insured, Limits, Supplementary Payments, Conditions & Common Policy Conditions

3.3 CGL Who Is an Insured, Limits, Supplementary Payments, Conditions & Common Policy Conditions

Section 3.2 covered the CGL insuring agreements (Coverages A, B and C), triggers and exclusions. The Hawaii adjuster outline also lists who is an insured, limits, supplementary payments, and conditions, and it tells candidates to know ISO's Common Policy Conditions. These provisions often decide a liability claim before negligence is ever discussed: Is the person sued an insured? Did the insured give notice? Which policy is primary?

Section II — Who Is an Insured

The named insured's form of organization controls who else is covered.

Additional insureds by status:

• Employees (other than executive officers) and volunteer workers, for acts within the scope of their employment or volunteer duties. They are not insureds for bodily injury or personal and advertising injury to the named insured, a co-employee or co-volunteer, or for property damage to property owned, occupied or used by the named insured.
• A real estate manager acting for the named insured.
• A person with temporary custody of the named insured's property after the named insured's death, and the named insured's legal representative if the named insured dies.
• Operators of mobile equipment on a public highway with the named insured's permission.
• Newly acquired or formed organizations (other than partnerships, joint ventures or LLCs) in which the named insured has majority ownership, for up to 90 days or the end of the policy period, whichever is earlier, unless other similar insurance applies.

A partnership, joint venture or LLC that is not shown in the declarations is not an insured for its conduct. An additional insured (for example, a landlord or project owner) gets coverage only through an endorsement, not through a certificate of insurance (1.4).

Section III — Limits of Insurance

The limits interact as a hierarchy:

• General aggregate — the most the insurer pays for the sum of Coverage A damages (except products-completed operations), Coverage B damages, and Coverage C medical expenses.
• Products-completed operations aggregate — a separate cap for Coverage A damages within the products-completed operations hazard.
• Each occurrence limit — the most paid for Coverage A damages and Coverage C medical expenses arising from any one occurrence.
• Personal and advertising injury limit — the most paid under Coverage B for all damages sustained by any one person or organization.
• Damage to premises rented to you limit — the most paid for damage by fire (or other perils if endorsed) to premises rented to or temporarily occupied by the named insured. It is part of the each occurrence limit.
• Medical expense limit — the most paid under Coverage C for any one person.

The aggregate limits apply separately to each consecutive annual period. If the policy period is extended after issuance for less than 12 months, the extension is treated as part of the last preceding period.

Supplementary Payments (Coverages A and B)

In addition to the limits, the insurer pays:

1. all expenses the insurer incurs, including defense;
2. up to $250 for the cost of bail bonds required because of accidents or traffic law violations arising out of the use of any vehicle to which BI liability coverage applies (the insurer does not have to furnish the bonds);
3. the cost of bonds to release attachments, up to the applicable limit;
4. all reasonable expenses the insured incurs at the insurer's request, including actual loss of earnings up to $250 a day because of time off from work;
5. all court costs taxed against the insured, except attorneys' fees or expenses taxed against the insured;
6. prejudgment interest on the part of a judgment the insurer pays; and
7. post-judgment interest until the insurer pays, offers to pay, or deposits in court the part of the judgment within the limit.

The duty to defend and to pay supplementary payments ends when the applicable limit is used up in paying judgments or settlements. The insurer does not keep defending after the limits are exhausted.

The supplementary payments section also explains when the insurer defends an indemnitee — a party whose liability the named insured assumed in an insured contract (3.2) — and pays that party's defense costs.

Section IV — CGL Conditions

Equal Shares Example

Two primary CGL policies cover the same $300,000 loss: Policy A has a $1,000,000 limit and Policy B a $250,000 limit, and both allow contribution by equal shares. Each pays in equal amounts until one limit is exhausted. Here, each policy pays $150,000, and both are within limits. If the loss were $700,000, each would pay $250,000. Policy B is then exhausted, and Policy A pays the remaining $200,000, for a total of $450,000 from A and $250,000 from B.

ISO Common Policy Conditions (IL 00 17)

These conditions are attached to every commercial policy, package or monoline.

1. Cancellation — The first named insured may cancel by mailing or delivering advance written notice. The insurer may cancel by mailing or delivering written notice to the first named insured at least 10 days before the effective date if cancelling for nonpayment of premium, or 30 days before for any other reason. Premium refunds go to the first named insured, and the insurer's refund is pro rata (a short-rate refund may apply when the insured cancels). State amendatory endorsements may lengthen these periods.
2. Changes — The policy contains all agreements. Terms can be changed only by endorsement issued by the insurer. The first named insured is authorized to request changes with the insurer's consent.
3. Examination of your books and records — The insurer may examine and audit the insured's books and records related to the policy at any time during the policy period and up to three years afterward.
4. Inspections and surveys — The insurer may inspect and make recommendations but does not guarantee safety or code compliance. The condition protects insurers and rating organizations from liability for inspections.
5. Premiums — The first named insured is responsible for paying premiums and receives return premiums.
6. Transfer of your rights and duties — The insured's rights and duties may not be transferred without the insurer's written consent, except to a surviving spouse or legal representative on the death of an individual named insured.

Adjuster Application

When a suit arrives, the adjuster works through these provisions in order:

1. Is the defendant an insured under Section II?
2. Did the insured give timely notice, or did late notice prejudice the defense?
3. Does another policy share the loss under the other insurance condition?
4. How much of the occurrence limit and aggregate remains?

Supplementary payments are tracked separately so defense costs do not erode the limits.