10.3 Who Is an Insured and Supplementary Payments

Who Is an Insured

The Section II — Who Is an Insured provision of the CG 00 01 defines coverage by the named insured's business structure shown in the Declarations. The status of individuals and entities flows automatically from that structure.

Automatically Added Insureds

Beyond owners, the form automatically extends insured status to:

• Volunteer workers — only while performing duties related to the insured's business; covered for BI/PD and P&AI but not for injury to a fellow employee or to the named insured.
• Employees (other than executive officers) — for acts within the scope of employment. Important traps: employees are not insureds for (1) BI/PD to a fellow employee or to the named insured, (2) BI/PD arising from providing professional health care (except specified), or (3) damage to property owned/occupied by or rented to the employee or named insured.
• Newly acquired or formed organizations — automatically covered for up to 90 days (or the end of the policy period, whichever is earlier), but not before acquisition and not for products-completed operations exposures prior to acquisition.
• Real estate managers acting for the named insured (persons or organizations).
• Legal representatives if the named insured dies (regarding the insured's duties).
• Trustees of a trust named as the named insured (as to their duties as trustees).

Note: No person or organization is an insured for the conduct of any current or past partnership, joint venture, or LLC that is not shown as a named insured. This 'orphan entity' rule is frequently tested.

Additional Insureds vs. Named Insureds

Do not confuse automatic insureds with Additional Insureds added by endorsement. Common ISO additional-insured endorsements include CG 20 10 (owners, lessees, or contractors — completed-operations excluded) and CG 20 37 (products-completed operations). A landlord, lender, or project owner is typically added by endorsement to obtain status under another party's CGL — for example, a general contractor adds the project owner as an additional insured via CG 20 10 + CG 20 37.

Additional insureds receive coverage only for liability arising out of the named insured's work or operations, not for their own independent negligence (post-2013 ISO forms tightened this). Their coverage is also limited to the lesser of the policy limit or the limit required by the written contract. This contractual-risk-transfer mechanism is central to construction insurance and a common exam theme: the downstream party (subcontractor) names the upstream party (GC or owner) as an additional insured so the subcontractor's CGL responds first.

Supplementary Payments — Coverages A and B

Supplementary Payments are amounts the insurer pays in addition to the Limits of Insurance. Because they are outside the limits, they do not erode the Each Occurrence limit or aggregates. The listed payments are:

• All expenses the insurer incurs (including defense investigation costs).
• Up to $250 for bail bonds required because of an accident or traffic-law violation arising out of a covered auto the policy applies to.
• The cost of bonds to release attachments, but only for bond amounts within the applicable limit (the insurer is not obligated to furnish the bond).
• Reasonable expenses incurred by the insured at the insurer's request to assist in the defense, including up to $250 a day for lost earnings.
• All court costs taxed against the insured in the suit (but not attorneys' fees or expenses taxed against the insured).
• Pre-judgment interest awarded against the insured on that part of the judgment the insurer pays (if the insurer makes an offer to pay the applicable limit, it does not pay prejudgment interest after that date).
• All interest on the full amount of any judgment that accrues after entry of the judgment and before the insurer pays/tenders/deposits its share (post-judgment interest).

Worked Example

An insured wins a defense but incurs $900 in lost wages over three days assisting the insurer (at $300/day) plus a $250 bail bond. Supplementary Payments reimburse lost earnings at $250 per day = $750 (not $900), plus the $250 bail bond = $1,000, all paid outside the policy limits. The $50/day excess wage is not reimbursed.

Why It Matters

Because Supplementary Payments sit outside the limits, a small policy can deliver far more value than its face amount when a long, expensive defense is mounted. A $1,000,000 policy might generate hundreds of thousands in defense expense, court costs, and post-judgment interest — all on top of the $1,000,000. This is exactly why exam questions stress that defense and Supplementary Payments do not erode the aggregate, whereas Coverage C Medical Payments (a sub-limit) does erode the Each Occurrence limit. Memorize which items are inside vs. outside the limits.