In a commercial general liability policy, the named insured is the person or organization that is specifically listed as the owner or policyholder on the declarations page. Beyond that specifically described named insured, the general liability coverage form also grants insured status to a number of other persons and entities. Knowing who is an insured is an important part of understanding the protection offered by the general liability coverage form.
The ISO Form CG0001
To further understand who is an insured, we will be examining the ISO CG0001 04/13 edition. Section 1 (Coverages) of this policy reads as follows (italics added):
We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies. We will have
the right and duty to defend the insured against any “suit” seeking those damages.
There are several important points to consider from the above policy verbiage:
- The policy pays on behalf of the insured (notice it does not say named insured)
- Coverage applies only when the insured is legally obligated for damage or injury
- The policy pays only for injury and damage claims to which the insurance applies
(See related article: general liability exclusions).
Who is An Insured
Section II of the general liability policy form defines who is an insured. The persons and organizations included as an insured are surprisingly broad and extend far beyond the named insured listed in the declarations page. The relationship to the named insured determines whether those persons are insured and when limited protection applies. It is important to understand that the only named insured has broad coverage under the GL policy. Other insured persons or entities have limited coverage, triggered by their duties on behalf of the named insured. The CG0001 04/13 divides these insureds into three categories:
Category 1: Owners, partners, members, officers, directors, stockholders, trusts, and trustees
Category 2: Volunteers, employees, real estate managers, temporary custodians, and legal representatives
Category 3: Newly acquired or formed organizations.
Owners of the business entity described as a named insured are given insured status. If the named insured is an individual or partnership, spouses are also insureds. LLC members and corporate officers, directors, and stockholders are also insured. If the named insured is a trust, the trustees are also insured.
Regardless of the type of business entity, insureds are only covered for their business activities, or with respect to their duties and conduct as the business owner, member, officer, or stockholder. Liability that arises from any personal activity must be covered elsewhere, such as personal auto, home, or umbrella insurance.
Volunteer workers and employees are also insureds but, as with owners of the business, coverage is provided only for business-related activities. The CG0001 form reads as follows (italics added):
Each of the following is also an insured: Your “volunteer workers” only while performing duties related to the conduct of your business, or your “employees”, other than either your
“executive officers” (if you are an organization other than a partnership, joint venture or limited liability company) or your managers (if you are a limited liability company), but only for acts within the scope of their employment by you or while performing duties related to the conduct of your business.
No coverage is afforded an employee or volunteer if the occurrence of injury or damage was unrelated to their official duties or conduct of the named insured’s business. Again, liability from personal activities should be covered by personal insurance policies.
Also included in this category is any non-employee real estate manager while acting on behalf of the named insured. Temporary custodians and legal representatives are also insured, in the event of the death of the named insured.
Newly formed or acquired organizations are also granted insured status but several caveats limit coverage. The policy form reads as follows (italics added):
Any organization you newly acquire or form, other than a partnership, joint venture or limited liability company, and over which you maintain ownership or majority interest, will qualify as a Named Insured if there is no other similar insurance available to that organization. However:
a. Coverage under this provision is afforded only until the 90th day after you acquire or form the organization or the end of the policy period, whichever is earlier;
b. Coverage A does not apply to “bodily injury” or “property damage” that occurred before you acquired or formed the organization; and
c. Coverage B does not apply to “personal and advertising injury” arising out of an offense
committed before you acquired or formed the organization.
Note the restriction as to the type of entities not automatically covered. A newly acquired LLC, joint venture, or partnership must be immediately listed as a named insured for coverage to apply. Further, the policy limits automatic coverage for qualifying entities to 90 days or the policy expiration (whichever comes first). Lastly, any instances of injury, damage, or personal injury that occurred prior to formation or acquisition are not covered.
An Accurate Named Insured
As a business owner, it is critical that the described named insured(s) in your policy is accurate and reflects the legal entity you operate under. The specific named insured is afforded the broadest coverage in the policy. You should disclose with your agent any other entities or names your business operates under to determine how they should be listed on a general liability policy.