Who Is an Insured and Supplementary Payments

Who Is an Insured (Section II of CG 00 01)

The Who Is An Insured provision defines automatically covered parties based on the named insured's legal form shown in the declarations. This is one of the most tested casualty topics because coverage depends on entity type.

This structure means a sole proprietor's spouse is an insured, but a corporation's spouse is not automatically covered.

Additional Automatic Insureds

Beyond the named insured's owners, Section II automatically includes certain other parties:

• Employees and volunteer workers are insureds for acts within the scope of employment or while performing duties related to the business - but NOT for bodily injury to a co-employee, the named insured, or for professional health-care services (with limited exceptions).
• Real estate managers acting on the insured's behalf.
• A person/organization having temporary custody of property of a deceased named insured (until a legal representative is appointed).
• A legal representative of the named insured if the named insured dies.
• Newly acquired or formed organizations (other than partnerships/JVs/LLCs) are covered automatically for up to 90 days or the end of the policy period, whichever is earlier - and only if the named insured owns more than 50%.

Trap: Employees are NOT insureds for injury they cause to a fellow employee or to the named insured.

Additional Insured Endorsements

Parties not automatically covered - such as landlords, lessors of equipment, vendors, or contractors named in a contract - become insureds only through additional insured endorsements (e.g., CG 20 10 for owners/lessees/contractors regarding ongoing operations, CG 20 37 for completed operations). These endorsements are negotiated in business contracts and are frequently tested as the mechanism to extend the named insured's coverage to a third party.

Trap: Being named in a contract does not create coverage by itself; the appropriate additional insured endorsement must be attached to the policy.

Current ISO additional insured endorsements often limit the additional insured's coverage to the extent permitted by law and to no broader than required by the written contract, and they make the additional insured's coverage excess unless the contract requires it to be primary. Producers must read the indemnity and insurance clauses of a business contract together so the policy actually delivers the primary, non-contributory coverage the contract promises - a frequent source of errors-and-omissions exposure for the agent.

Supplementary Payments (Coverages A and B)

Supplementary Payments are paid by the insurer in addition to the limits of insurance when the insurer defends a covered claim. They are NOT subject to the Each Occurrence or aggregate limits. The standard CGL list includes:

• All expenses the insurer incurs.
• Up to $250 for bail bonds required because of accidents or traffic-law violations arising out of a covered vehicle's use (the insurer is not obligated to furnish the bond).
• The cost of bonds to release attachments (limited to the applicable limit of insurance).
• Reasonable expenses incurred by the insured at the insurer's request to assist in the defense, including up to $250 a day for actual loss of earnings.
• All court costs taxed against the insured (but not attorneys' fees as costs).
• Pre-judgment interest awarded against the insured on the part of the judgment the insurer pays.
• Post-judgment interest that accrues on the full judgment until the insurer pays/tenders/deposits its share.

A further provision treats certain costs an additional insured incurs in a contractually assumed "insured contract" as supplementary payments rather than damages, so they likewise do not erode the limits. Memorize the list as the insurer's defense-support package: it funds the defense effort and the incidental costs of being sued, all on top of the indemnity limit.

Supplementary Payments - Worked Numerics and Traps

Worked example. An insured with a $1,000,000 Each Occurrence limit is sued. The insurer defends. A jury returns a $1,000,000 judgment. The insurer pays:

• The $1,000,000 judgment (full occurrence limit).
• PLUS defense costs, court costs taxed against the insured, the bail bond ($250 cap), loss-of-earnings reimbursement ($250/day cap), and pre/post-judgment interest - all outside the $1,000,000 limit.

This is why a single severe claim can cost the insurer far more than the stated limit. Key memory hooks: bail bond $250, loss of earnings $250/day. Both are flat caps that exams test verbatim.

Trap: Pre-judgment interest is paid only on the portion of the judgment the insurer actually pays, but post-judgment interest accrues on the entire judgment until the insurer tenders its share - even the part above the policy limit.

A second common trap: the insurer is not obligated to furnish or arrange the bail bond; the $250 figure is merely the maximum the insurer will reimburse if a bond is required because of a covered accident or traffic violation. Likewise, the $250/day loss-of-earnings figure reimburses the insured's actual lost earnings up to that cap - it is not a flat daily stipend paid regardless of actual loss.