Who Is an Insured and Supplementary Payments

Who Is an Insured

The Who Is an Insured section (Section II of the CG 00 01) automatically defines who is protected, keyed to the named insured's business structure shown in the declarations. Producers must know that the legal form dictates which related persons are covered.

Coverage by Business Structure

In all cases, coverage applies only with respect to the conduct of the named insured's business, not personal activities.

Employees, Volunteers, and Newly Acquired Entities

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

• Bodily injury to a fellow employee or to the named insured (the fellow-employee exclusion);
• Property damage to property owned or occupied by the employee.

Newly acquired or formed organizations are automatically insureds for up to 90 days (or the end of the policy period, whichever is earlier), as long as the named insured owns more than 50 percent and the entity is not covered by other similar insurance.

Exam Trap: Scope Matters

The most common trap is assuming an officer or employee is always covered. Coverage only attaches when the person acts within the scope of the business or their duties. An executive officer who causes a car accident on a personal weekend errand is not an insured under the CGL for that loss.

Also note: the named insured shown in the declarations is the first named insured, who has special duties (paying premium, receiving notices) and rights (requesting cancellation).

Supplementary Payments

Supplementary Payments are amounts the insurer pays in addition to the limit of insurance. Because they are outside the limit, they never reduce the Each Occurrence or aggregate amounts available to pay damages. This is a frequently tested distinction.

These payments apply only once the insurer is defending a suit or investigating a claim — they are tied to the defense obligation.

What Supplementary Payments Include

• All defense costs the insurer incurs (attorney fees, expert witnesses, court costs).
• Up to $250 for the cost of bail bonds required because of an accident or traffic-law violation arising from a covered vehicle.
• The cost of bonds to release attachments and appeal bonds, but the insurer is not obligated to furnish the bond itself.
• Up to $250 per day for the insured's loss of earnings while assisting in the defense.
• Reasonable expenses the insured incurs at the insurer's request.
• All costs taxed against the insured in the suit and pre-judgment interest on the covered amount.
• Post-judgment interest that accrues after entry of judgment and before the insurer pays its share.

Worked Example

An insured with a $1,000,000 Each Occurrence limit is sued. The judgment is $1,000,000 (the full limit). The insurer also incurs $120,000 in defense costs and $8,000 in post-judgment interest.

• The insurer pays the $1,000,000 damages plus the $120,000 defense plus the $8,000 interest — a total of $1,128,000.
• Because Supplementary Payments are outside the limit, the defense and interest do not eat into the $1,000,000 owed to the claimant.

"Who Is an Insured" Categories and Supplementary Payments

The CGL's Section II – Who Is an Insured automatically extends coverage beyond the named insured based on its legal form. For a sole proprietor, the spouse is an insured for the business; in a partnership, the partners and their spouses are insureds for business conduct; in a corporation, executive officers, directors, and stockholders are insureds for their business duties; and employees and volunteers are insureds for acts within the scope of their work (with key exceptions).

Important employee exceptions: coverage does not apply to an employee for bodily injury to a co-employee or to the employer, nor for damage to property the employee owns/controls. Adding outside parties (landlords, clients) requires an additional insured endorsement such as CG 20 10 (ongoing operations) or CG 20 37 (completed operations).

Supplementary payments under the CGL parallel the auto policy: defense costs, up to $250 for bail bonds, the cost of bonds to release attachments, up to $250/day for the insured's lost earnings to assist the defense, post-judgment interest, and reasonable expenses at the insurer's request — all paid in addition to the limits. Trap: once the insurer pays the limit in settlement or judgment, its duty to defend and to pay further supplementary costs ends.

Additional-Insured Endorsements and Worked Status Traps

Outside parties become insureds only through an additional insured (AI) endorsement, and the exam tests the common ones precisely: CG 20 10 covers a party (e.g., a property owner or general contractor) for the named insured's ongoing operations; CG 20 37 covers them for completed operations; and CG 20 26 adds a designated person or organization broadly. AI status is usually limited to liability arising out of the named insured's work, not the additional insured's own sole negligence.

Worked status scenario: A general contractor (GC) requires its subcontractor's CGL to name the GC as an additional insured for ongoing and completed operations, and to be primary and noncontributory. When a worker is injured by the sub's ongoing work, the sub's CGL defends the GC as an AI under CG 20 10, and because of the primary/noncontributory wording, the GC's own CGL does not have to contribute. But if the injury arises solely from the GC's own negligence (unrelated to the sub's work), the AI grant does not respond — a frequently tested limit.

Pairing AI endorsements with "who is an insured" automatic status is the section's core skill.