CGL Insureds & Supplementary Payments

Who Is an Insured Under the CGL

The CGL's definition of insured depends on how the named insured is organized, and the exam expects you to identify the insureds for each structure. The Who Is An Insured section automatically extends coverage beyond the named entity.

Employees, Volunteers, and Newly Acquired Entities

Regardless of organization, the CGL automatically covers employees and volunteer workers for acts within the scope of their duties or the insured's business, with important limits: employees are not insureds for injury to a fellow employee or to the named insured (workers compensation handles employee injuries), and they are not covered for liability arising from professional services.

The policy also automatically covers newly acquired or formed organizations (other than partnerships, joint ventures, or LLCs) for a limited period, typically until the end of the policy period or 90 days, whichever is earlier, prompting the insured to report the acquisition.

Additional Insureds

Businesses frequently must add additional insureds by endorsement to satisfy contracts, a landlord, a project owner, a vendor, gaining coverage for liability arising out of the named insured's work or premises. Additional-insured status is a major commercial topic because a contractor's CGL often must name the project owner and general contractor. The scope of the additional insured's coverage depends on the specific endorsement and is usually limited to liability connected to the named insured's operations.

Supplementary Payments

The CGL pays supplementary payments in addition to the limits, which the exam tests because candidates assume these erode coverage. They include: all expenses the insurer incurs; the cost of bail bonds up to a stated amount and bonds to release attachments; reasonable expenses the insured incurs at the insurer's request, including lost earnings up to a daily limit; court costs taxed against the insured; prejudgment interest awarded against the insured on covered damages; and post-judgment interest that accrues after entry of judgment.

Because these are outside the limits, they preserve the full limit for damages.

Applying the Insured Analysis

When a CGL scenario asks whether a party is covered, first identify the named insured's organizational form to find the automatic insureds, then check whether the claimant is an employee (covered for business acts but not for injuring a coworker), a newly acquired entity (covered for the limited window), or an additional insured added by endorsement (covered within the endorsement's scope). Then recall that defense and supplementary payments come on top of the limits.

This sequence, organizational insureds, employees and volunteers, newly acquired organizations, additional insureds, supplementary payments, lets you resolve the who-is-covered and how-much-is-available questions that recur throughout the CGL portion of the exam.

Determining Insureds and Outside-the-Limits Payments

Who counts as an insured under the CGL depends on the named insured's organizational form, so identify it first. A sole proprietor and spouse are insured for the business; a partnership covers the partnership and its partners (and spouses) for business conduct; an LLC covers the LLC, its members (for business), and managers (for their duties); a corporation covers the entity, its executive officers and directors (for their duties), and stockholders (for liability as stockholders).

Beyond the entity, the CGL automatically covers employees and volunteer workers for business acts, but not for injuring a fellow employee or the named insured (workers compensation handles that) and not for professional services. Newly acquired or formed organizations (other than partnerships, joint ventures, or LLCs) are covered for a limited period, often 90 days. Additional insureds are added by endorsement to satisfy contracts, with coverage limited to the endorsement's scope.

Supplementary payments are paid in addition to the limits, a frequently tested point: the insurer's expenses, the cost of bail and attachment bonds, the insured's reasonable expenses (including lost earnings up to a daily cap) at the insurer's request, court costs, prejudgment interest on covered damages, and post-judgment interest. Because these sit outside the limits, the full limit remains available for damages.

When a CGL scenario asks whether a party is covered or how much is available, identify the organizational insureds, check employee/newly acquired/additional-insured status, and remember that defense and supplementary payments do not erode the limits.

Identify the named insured's organizational form to find the automatic insureds, then check employee status (covered for business acts but not for injuring a coworker or for professional services), newly acquired entities (covered for a limited period, often 90 days), and additional insureds (covered within the endorsement's scope). The exam reliably tests that supplementary payments, bonds, the insurer's expenses, court costs, and prejudgment and post-judgment interest, are paid in addition to the limits, preserving the full limit for damages.

A worker injuring a fellow employee is not an insured for that claim, which workers compensation and employers liability handle instead.