Understanding the 'Who is an Insured' Section
In the Commercial General Liability (CGL) policy, the definition of an "insured" is critical because it determines exactly whose actions are covered and who receives protection under the policy's limits. The policy distinguishes between the Named Insured (the entity or person listed on the declarations page) and Automatic Insureds (those who qualify for coverage by virtue of their relationship to the named insured).
For those preparing for the practice General Liability questions, understanding the nuances of how different business structures affect coverage is essential. The CGL form (Section II) explicitly outlines who is covered based on how the business is legally organized. If you are just starting your studies, you may want to review our complete General Liability exam guide for a broader perspective on policy structure.
Coverage by Legal Entity Type
| Feature | Entity Type | Who is Considered an Insured? |
|---|---|---|
| Individual (Sole Proprietor) | The individual and their spouse, but only with respect to the conduct of a business of which the individual is the sole owner. | |
| Partnership or Joint Venture | The partnership/joint venture, its members, its partners, and their spouses, but only with respect to the conduct of the business. | |
| Limited Liability Company (LLC) | The LLC itself, its members (with respect to business conduct), and its managers (with respect to their duties as managers). | |
| Corporation / Organization | The organization, its executive officers and directors (regarding their duties), and its stockholders (regarding their liability as stockholders). | |
| Trust | The trust itself and its trustees, but only with respect to their duties as trustees. |
Automatic Insureds: Employees and Volunteers
Beyond the primary owners and managers, the CGL policy extends "insured" status to several other categories of people. This extension ensures that the boots-on-the-ground workforce is protected while performing their jobs.
- Employees: Most employees are considered insureds for acts within the scope of their employment or while performing duties related to the conduct of the business. However, coverage is generally excluded for bodily injury or personal/advertising injury to the named insured, partners, or co-employees.
- Volunteer Workers: Similar to employees, volunteers are covered while performing duties related to the business. This inclusion acknowledges that modern businesses often rely on non-paid help that carries the same liability risks as paid staff.
Note: No employee or volunteer is an insured for medical expenses under Coverage C for injuries sustained while working for the business; those are typically handled by workers' compensation.
The Separation of Insureds Provision
Also known as the Severability of Interests clause, this provision states that the insurance applies separately to each insured against whom a claim is made or suit is brought. While the limits of insurance are shared, each insured is treated as if they have their own policy for the purpose of determining coverage and exclusions.
Other Entities Covered Automatically
The CGL policy also provides coverage for specific external parties and representatives in the following scenarios:
- Real Estate Managers: Any person (other than an employee or volunteer) or any organization acting as a real estate manager for the named insured.
- Legal Representatives: If the named insured dies, any person or organization having proper temporary custody of the property is covered until a legal representative is appointed. The legal representative then becomes an insured with respect to their duties as such.
- Mobile Equipment Operators: Any person driving mobile equipment registered in the named insured's name (with permission) is covered, though this is subject to specific limitations regarding auto-related exclusions.
Newly Acquired Organizations
Newly Acquired or Formed Organizations
One of the most important features for growing businesses is the provision for newly acquired or formed organizations. If the named insured acquires or forms a new organization (other than a partnership, joint venture, or LLC) and maintains majority ownership, that new entity is automatically considered a named insured.
However, this automatic status is temporary. It expires at the end of 90 days or the end of the policy period, whichever comes first. Crucially, coverage does not apply retroactively; it only covers bodily injury or property damage that occurs after the entity was acquired or formed.