10.3 Who Is an Insured and Supplementary Payments

Section II - Who Is An Insured

The named insured is shown in the declarations, but Section II of CG 00 01 automatically extends insured status to others. The extension depends on the form of business entered in the declarations:

Exam trap: a partner's coverage applies only to business conduct of the partnership — not to that partner's personal, unrelated activities. Choosing the wrong business-form designation on the declarations can silently leave owners uninsured, so producers must match the declarations to the entity's actual legal structure.

The insured definition is deliberately broad so that the people who run the business are covered without being individually named, while still tying that coverage back to acts performed in the course of business. Anyone outside this list — vendors, landlords, lenders, project owners — must be added by endorsement, covered in the additional-insured discussion later in this unit.

Automatic Insureds Regardless of Entity Type

Beyond the named insured's owners, Section II automatically includes:

• Employees and volunteer workers — but only for acts within the scope of their employment or while performing duties related to the business.
• Real estate managers acting on the named insured's behalf.
• The named insured's legal representative if the named insured dies (only with respect to the duties as that representative).
• Newly acquired or formed organizations — automatically insured for up to 90 days or the end of the policy period, whichever is earlier, provided the named insured owns more than 50% and the entity is not a partnership, joint venture, or LLC.

Critical Employee Coverage Carve-Outs

Employees and volunteer workers are NOT insureds for:

• Bodily injury or personal/advertising injury to the named insured, partners/members, or a co-employee while in the course of employment;
• Property damage to property owned, occupied, or controlled by the employee or co-employee.

This is why the employers liability exclusion and workers' compensation sit outside the CGL: injury to one's own employees is not a CGL third-party loss.

Supplementary Payments - Coverages A and B

Supplementary Payments are paid in addition to the limits of insurance — they never reduce the Each Occurrence, aggregate, or Coverage B limits. They include:

• All expenses the insurer incurs, including investigation and defense.
• Up to $250 for the cost of bail bonds required because of an accident or traffic-law violation arising out of the use of a covered vehicle.
• The cost of bonds to release attachments, but only for bond amounts within the applicable limit.
• All reasonable expenses the insured incurs at the insurer's request to help with the defense, including up to $250 a day for loss of earnings.
• All court costs taxed against the insured (but not pre/post-judgment interest as costs — interest has its own provision).
• Prejudgment interest on the part of the judgment the insurer pays, and postjudgment interest on the full judgment until the insurer pays or deposits its limit.

Additional Insureds by Endorsement

The automatic insureds above are built into the form. Anyone else — a landlord, a general contractor requiring coverage from a subcontractor, a project owner — becomes an additional insured only by endorsement. Key ISO additional insured endorsements:

Risk-transfer trap: to protect a project owner for both ongoing AND completed work, a contract typically requires both CG 20 10 and CG 20 37, because CG 20 10 alone stops at the end of ongoing operations. Current editions limit additional insured coverage to liability caused by the named insured's acts or omissions and cap the protection at the lesser of the policy limit or the limit the contract required — not the additional insured's sole negligence.

How These Pieces Work Together

In a typical construction claim, a subcontractor (named insured) buys a CGL, names the general contractor and project owner as additional insureds via CG 20 10 and CG 20 37, and relies on Supplementary Payments to fund the defense of all of them. The named insured's own employees are automatic insureds for job-site acts, while injury to those employees is routed to workers' compensation rather than the CGL. Mastering who is an insured, what is paid outside the limits, and how additional insured endorsements transfer risk is among the most heavily tested commercial-lines material on the national exam.

Who Is an Insured Under the CGL

The CGL (CG 00 01) defines insureds by the named insured's business structure, a distinction the exam tests precisely:

Employees are insureds for acts within the scope of employment but not for injury to co-employees or to the named insured; temporary workers and volunteers have similar limited status. Newly acquired or formed organizations are covered automatically for up to 90 days.

Additional Insureds

Third parties (landlords, lenders, project owners) are added by Additional Insured endorsements (e.g., CG 20 10 for owners/lessees, CG 20 37 for completed operations). They gain insured status only for liability arising out of the named insured's work or premises, frequently required by contract.

Supplementary Payments

Like the PAP, the CGL pays supplementary amounts in addition to the limit: all defense costs, up to $250 bail bonds, cost of bonds to release attachments, up to $250/day for the insured's lost earnings to assist defense, post-judgment interest, and reasonable expenses incurred at the insurer's request. Because defense is outside the limits, a long-defended suit does not erode the policy's indemnity capacity until judgment.

Worked Example

A corporation's CGL is sued; the company spends $90,000 defending and ultimately pays a $300,000 judgment on a $1,000,000 per-occurrence limit. Because defense costs are supplementary, the $90,000 does not reduce the limit, and the full $300,000 judgment is paid within the $1,000,000 cap - leaving $700,000 of that occurrence limit intact. By contrast, a defense-within-limits (eroding) policy, common in professional liability, would subtract the $90,000 from available limits. Knowing that standard CGL defense is outside the limit is a key tested distinction.