10.3 Who Is an Insured and Supplementary Payments

Who Is an Insured

The Section II - Who Is an Insured provision of the ISO CG 00 01 defines exactly who receives protection. The answer depends on the named insured's form of business shown in the Declarations. The exam frequently tests these distinctions, because the wrong party can void what looks like a valid claim.

The named insured is always an insured. Beyond that, the form automatically extends to specific people and entities depending on the business structure, and to certain newly acquired organizations. Additional parties (landlords, lenders, project owners) are added by additional insured endorsements, not automatically.

Insureds by Form of Business

In ALL cases, employees and volunteer workers are insureds for acts within the scope of their employment or duties — but NOT for injury to the named insured, to a fellow employee in the course of employment, or for professional health-care services (unless the insured is in that business).

Newly Acquired Organizations and Real Estate Managers

The CGL automatically covers an organization the named insured newly acquires or forms (other than a partnership, joint venture, or LLC) if the named insured maintains majority ownership. This automatic coverage lasts the lesser of 90 days or the end of the policy period, and does NOT apply to BI/PD that occurred before the acquisition.

Real estate managers — any person or organization acting as the named insured's real estate manager is also an insured. A common trap: a property owner who simply rents to a tenant is NOT automatically an insured of the tenant's CGL; that requires an additional insured endorsement such as CG 20 11 (managers or lessors of premises).

Common Additional Insured Endorsements

When contracts require naming another party, ISO additional insured endorsements are attached:

• CG 20 10 — Additional Insured - Owners, Lessees or Contractors (Scheduled). Covers ongoing operations.
• CG 20 37 — Additional Insured - Owners, Lessees or Contractors - Completed Operations.
• CG 20 11 — Managers or Lessors of Premises.
• CG 20 26 — Additional Insured - Designated Person or Organization.

Trap: CG 20 10 (ongoing ops) does NOT extend to completed operations; a contractor often needs BOTH CG 20 10 and CG 20 37 to satisfy a contract requiring ongoing and completed-operations coverage for the project owner.

Supplementary Payments

Supplementary Payments - Coverages A and B are amounts the insurer pays in addition to the limits of insurance when it defends a claim. Because they are outside the limits, they do not erode the Each Occurrence or aggregate limits. The standard CGL supplementary payments include:

• All expenses the insurer incurs.
• Up to $250 for the cost of bail bonds required because of an accident or traffic-law violation arising out of a covered vehicle (the insurer is not obligated to furnish the bond).
• The cost of bonds to release attachments, up to the applicable limit.
• Reasonable expenses the insured incurs at the insurer's request, including up to $250 per day for loss of earnings.

More Supplementary Payments and a Worked Example

The list continues with:

• All court costs taxed against the insured in the suit (but not pre-judgment interest as part of the award).
• Pre-judgment interest awarded against the insured on the part of the judgment the insurer pays.
• All post-judgment interest that accrues after entry of judgment and before the insurer pays/deposits its share.

Worked example: A CGL has a $500,000 Each Occurrence Limit. A judgment of $500,000 is entered. The insurer also incurs $40,000 in defense costs and $6,000 in court costs, plus $3,000 post-judgment interest. Because supplementary payments are outside the limit, the insurer pays $500,000 (limit) + $40,000 + $6,000 + $3,000 = $549,000 total, and the insured owes nothing more. Defense and these costs do not reduce the $500,000 limit.

Additional Insureds vs. Named Insureds and CG 20 10/20 37

The CGL distinguishes the named insured (on the declarations) from automatic insureds (employees within scope of duties, volunteers, newly acquired entities for up to 90 days) and additional insureds added by endorsement.

A general contractor commonly requires a subcontractor to add the GC as an additional insured under both CG 20 10 (ongoing) and CG 20 37 (completed operations) to be protected during and after the work.

Trap: an employee is automatically an insured for acts within the scope of employment but not for bodily injury to a co-employee or to the employer — those are excluded (workers comp territory).