10.3 Who Is an Insured and Supplementary Payments
Key Takeaways
- The 'Who Is an Insured' provision in Section II of the CGL automatically extends coverage based on the named insured's business structure — individual, partnership, LLC, corporation, or trust — without listing every person by name.
- Employees and volunteer workers are insureds for acts within the scope of employment, but not for injury to fellow employees or to the named insured, and not for their own property.
- Newly acquired or formed organizations are automatically insured for up to 90 days, but never for events before acquisition or for coverage available under another policy.
- Supplementary Payments are paid in addition to the limits and include all defense costs, up to $250 for bail bonds, the cost of release-of-attachment bonds, up to $250/day for the insured's lost earnings, and post-judgment interest.
- Additional insureds are added by endorsement (e.g., CG 20 10 / CG 20 37) and obtain only the scope of coverage the endorsement grants — a distinct concept from the automatic insureds in Section II.
Section II: Who Is an Insured
The Who Is an Insured provision (Section II of the CGL) automatically determines covered persons from the business structure shown in the declarations — no need to name each individual:
| Named insured type | Who else is automatically an insured |
|---|---|
| Individual | The individual and his/her spouse, but only for the conduct of the business |
| Partnership / joint venture | The partners/members and their spouses, for business conduct |
| LLC | The members (with respect to the LLC's conduct) and managers (with respect to their duties) |
| Corporation / other organization | Executive officers and directors (for their duties) and stockholders (for their liability as stockholders) |
| Trust | The trustees, for duties as trustees |
A central exam concept: the named insured shown on the declarations is the first named insured, who has special rights and duties — it receives cancellation notice, is responsible for paying premiums, and may request changes. Other automatic insureds derive coverage from the entity but lack those administrative privileges.
Employees, Volunteers, and Newly Acquired Organizations
Employees and volunteer workers are insureds for acts within the scope of their employment or duties for the named insured. Critical limitations — they are not insureds for:
- Bodily injury or personal/advertising injury to the named insured, to a fellow employee, or to a partner/member (the co-employee exclusion).
- Property damage to property owned, occupied, used by, rented to, or in the care of the employee or named insured.
- Providing professional health care services (unless the insured is in that business).
Newly acquired or formed organizations are automatically insured — but only until 90 days after acquisition or the end of the policy period, whichever is earlier; never for injury/damage before the acquisition; and never to the extent other similar insurance applies.
Who Is an Insured Under the CGL
The "Who Is an Insured" provision turns on how the named insured is organized:
| Named insured | Automatic insureds |
|---|---|
| Individual | The individual and spouse (business only) |
| Partnership/JV | Partners/members and their spouses (business only) |
| LLC | Members (business) and managers (duties only) |
| Corporation | Executive officers, directors, stockholders (their liability as such) |
In every case, employees and volunteer workers are insureds for acts within the scope of their duties, but not for injury to fellow employees or to the named insured, and not for their own professional services. Newly acquired/formed organizations are covered automatically for up to 90 days.
Supplementary Payments and Additional Insureds
The CGL pays supplementary payments in addition to the limits: all defense costs; up to $250 for bail bonds; the cost of appeal/release-of-attachment bonds; $250 per day for the insured's loss of earnings while assisting the defense; post-judgment interest; and other reasonable expenses incurred at the insurer's request. These do not erode the limit of insurance.
Additional insured endorsements extend coverage to another party (a landlord, a project owner, a customer) for liability arising out of the named insured's work or premises — common in construction and lease contracts. Because the additional insured shares the named insured's limit, a contractor often must carry higher limits to satisfy a contract's additional-insured requirement. The exam frequently tests that employees are insureds but get no coverage for injuring a coworker.
On March 1, ABC Corp (named insured on a CGL) acquires a new subsidiary, XYZ Inc. No endorsement is added. For how long, and under what condition, is XYZ automatically an insured?
Supplementary Payments
Supplementary Payments are paid in addition to the limit of insurance — they do not erode the occurrence or aggregate limits. For a suit the insurer defends, it will pay:
- All expenses the insurer incurs, including all defense costs.
- Up to $250 for the cost of bail bonds required because of an accident or traffic-law violation arising from a covered auto (no obligation to furnish the bond).
- The cost of bonds to release attachments, within the applicable limit.
- Reasonable expenses the insured incurs at the insurer's request, including up to $250 per day for loss of earnings to assist with the defense.
- All costs taxed against the insured in the suit.
- Pre-judgment interest awarded on the part of the judgment the insurer pays.
- Post-judgment interest that accrues on the full judgment until the insurer pays/tenders its limit.
Worked numeric: A jury awards $1,200,000 against an insured with a $1,000,000 each-occurrence limit. The insurer pays its $1,000,000 limit. Post-judgment interest accrues on the full $1,200,000 judgment only until the insurer tenders that $1,000,000; after tender, interest on the excess is the insured's problem. Memorize the two $250 caps: $250 bail bond and $250/day lost earnings; candidates routinely miss that these are flat dollar caps, not the policy limit.
Additional Insureds vs. Automatic Insureds
Do not confuse the automatic insureds in Section II with additional insureds added by endorsement. An additional insured is a separate party — often required by contract (a landlord, a project owner, a general contractor) — added via an ISO endorsement such as CG 20 10 (additional insured — owners, lessees, or contractors) or CG 20 37 (products-completed operations).
Key distinctions tested on the exam:
- An additional insured receives only the scope of coverage the endorsement grants, often limited to liability arising out of the named insured's work or operations for that party.
- Adding an additional insured does not increase the limits — they share the named insured's limits.
- A certificate of insurance is evidence of coverage; it does not itself create additional insured status — the endorsement does. This is a heavily tested trap.
A general contractor requires a subcontractor to add the GC as an additional insured. The subcontractor's agent issues a certificate of insurance naming the GC. Which statement is correct?