Who Is an Insured and Supplementary Payments
Key Takeaways
- Who Is an Insured depends on the named insured's business form; employees, volunteer workers, and real estate managers are automatically insured for in-scope acts.
- Newly acquired or formed organizations get automatic status until policy end or 90 days, whichever is earlier — but newly formed partnerships, JVs, and LLCs are excluded.
- Employees are not insured for injury to co-employees or to the named insured/partners; outside parties need an Additional Insured endorsement (CG 20 10 / CG 20 37).
- Supplementary Payments are paid in addition to the limits and never erode them; key tested amounts are the $250 bail bond and $250/day lost-earnings figures.
- Post-judgment interest runs on the entire judgment until the insurer tenders its limit; pre-judgment interest applies to the covered portion.
Who Is an Insured Under the CGL
Section II of the ISO CGL (CG 00 01) defines Who Is an Insured. The scope of insured status depends on the form of business shown in the declarations as the named insured. Beyond the named insured, the form automatically grants insured status to specified related persons and organizations — without anyone having to be individually listed.
Insured Status by Business Form
| Named Insured Is | Automatically Also Insured |
|---|---|
| Individual (sole proprietor) | The named insured and spouse (business activities only) |
| Partnership / Joint Venture | The partnership and its members/partners and their spouses (business only) |
| Limited Liability Company (LLC) | The LLC, its members (business only), and its managers (duties only) |
| Corporation / Other Organization | The organization, plus its executive officers and directors (their duties), and stockholders (liability as stockholders) |
In all business forms, the following are also insureds:
- Employees and volunteer workers — for acts within the scope of employment / duties (but NOT for injury to fellow employees or to the named insured, and not for professional health-care services beyond first aid in some forms).
- Real estate managers acting for the named insured.
- A person/organization with temporary custody of property of a deceased insured.
- A legal representative if the insured dies.
Newly Acquired Organizations
The CGL automatically extends insured status to organizations the named insured newly acquires or forms (other than partnerships, joint ventures, or LLCs) — but only:
- Until the end of the policy period, OR
- 90 days after acquisition/formation, whichever is earlier.
This automatic coverage does not apply to BI/PD or personal/advertising injury that occurred before the acquisition. A common trap: the 90-day window, and the exclusion of newly acquired partnerships/JVs/LLCs from automatic status.
Who Is an Insured and CGL Supplementary Payments
The "Who Is an Insured" section of the CGL defines insured status by the named insured's business structure:
| Named insured type | Automatic insureds |
|---|---|
| Individual | The person and spouse, for business conduct |
| Partnership/JV | Partners/members and their spouses, for business conduct |
| LLC | Members (for conduct of business) and managers (for their duties) |
| Corporation | Executive officers, directors, and stockholders (for their liability as such) |
| All | Employees and volunteer workers for acts within the scope of duties (with key exclusions); newly acquired/formed entities for up to 90 days |
Additional insureds (landlords, lenders, clients) are added by endorsement, often as a contract requirement.
The CGL pays Supplementary Payments in addition to the limit: defense costs, up to $250 for bail bonds, premiums on appeal/release-of-attachment bonds, up to $250/day for the insured's loss of earnings to assist defense, post-judgment interest, and reasonable expenses at the insurer's request.
Exam trap: Employees are insureds for work-scope acts but are NOT covered for injury to fellow employees or to the named insured (that is workers' comp/employers liability territory). Supplementary payments - bail bonds up to $250, loss of earnings up to $250/day, and defense - are paid OUTSIDE the limits, unlike the older auto figures; memorize the $250 figures, which differ from the PAP's $250 bail / $200 earnings.
A corporation forms a new subsidiary corporation on March 1. The CGL policy expires December 31. For how long does the new subsidiary automatically receive insured status under the CGL?
Common Insured-Status Traps
- Employee-on-employee injury is generally not covered for the offending employee — co-employee suits are excluded (and Workers Comp would respond instead).
- An employee is not an insured for injury to the named insured or to a partner/member.
- Newly formed partnerships, joint ventures, and LLCs are excluded from the automatic newly-acquired-organization extension.
- Adding outside parties (landlords, lenders) requires an Additional Insured endorsement (e.g., CG 20 10 for owners/lessees, CG 20 37 for completed operations) — they are not automatically insured.
Supplementary Payments
Supplementary Payments are amounts the insurer pays in addition to the limits of insurance — they do not erode the Each Occurrence limit or the aggregates. They apply to claims the insurer defends under Coverage A or B. The list is frequently tested verbatim.
Supplementary Payments List and Amounts
The insurer will pay, with respect to a claim it investigates or settles or a suit it defends:
| Supplementary Payment | Limit / Detail |
|---|---|
| All defense and investigation costs | Paid in full, outside the limit |
| Cost of bonds to release attachments | Up to the applicable limit (insurer not obligated to furnish) |
| Cost of bail bonds | Up to $250 (no obligation to furnish) |
| Reasonable expenses incurred at insurer's request | Including up to $250/day for lost earnings |
| All costs taxed against the insured in the suit | Paid in full |
| Pre-judgment interest | Awarded against the insured on the covered portion |
| Post-judgment interest | On the full judgment until insurer pays/tenders its limit |
Memory aids tested: $250 bail bond and $250/day lost earnings.
Pre- vs. Post-Judgment Interest (Worked Example)
Suppose the Each Occurrence limit is $300,000 and the jury awards $500,000. The insurer pays its $300,000 limit (Coverage A) and, as supplementary payments outside the limit, also pays:
- Pre-judgment interest on the portion of the judgment it pays.
- Post-judgment interest on the entire $500,000 judgment until it tenders/pays its $300,000 limit; once paid, post-judgment interest stops.
The insured remains responsible for the $200,000 excess of the judgment over the limit. This is why understanding that interest and defense costs sit outside the limit is a high-value exam point.
Under CGL Supplementary Payments, the cost of bail bonds required because of an accident covered by the policy is paid up to: