Supplemental Payments on your General Liability
Insurance policies have clauses addressing supplementary payments: the standard business auto policy, personal auto policy, and general liability policy all contain supplementary payments sections.
The first provision in the supplementary payments clauses states that the insurer will pay the expenses incurred. This seems reasonable since the insurer has the duty to defend against covered liability claims and assumes the right to settle any claim or lawsuit filed against the insured. This duty nd right obviously involve expenses, and in exercising that duty and right, the insurer should be responsible for the payment of those expenses.
This “paying the expenses” provision is common in liability policies, but the wording may raise some questions. For example, the general liability policy states that the insurer will pay the expenses it incurs in any lawsuit it defends; the business auto policy does not clarify this point, simply stating that the insurer will pay the expenses “for the insured.”
What supplementary costs are covered? This raises the question: what about investigative expenses or expenses incurred in settling a claim before any lawsuit? Since the auto policies do not limit the insurer’s expenses, it is presumed that any investigative or pre-lawsuit settlement expenses are covered.
The general liability policy does include investigative and settlement expenses in its preamble to the “paying the expenses” provision, while ot” er policies are less clear on this fact.
Other supplementary payment provisions deal with bonds. The general liability policy states that the insurer will pay up to $250 toward the cost of bail bonds required as a result of an accident. In contrast, the business auto policy will pay up to $2,000. The policies will also pay the cost of bonds to release attachments, wherein the bond is used to dissolve an attachment of property, that is, the legal satisfaction of a judgment or a lien upon property for any judgment satisfaction. The insurer does not have to apply for or furnish bail or release bonds.
Note that the various policies’ bond provisions do not mention the cost of premiums on appeal bonds required in any lawsuit defended by the insurer. This absence of a provision about appeal bonds begs the question: does the insurer have to appeal a decision against its insured? If there are reasonable grounds for an appeal, the insurer has the duty to pursue and provide for payment of the supplementary payments.
The supplementary payments provisions also offer to pay all reasonable expenses incurred by the insured if and when the insurer requests the insured to assist in the investigation or defense of the claim or lawsuit. This includes actual loss of earnings by the insured, up to $250 per day, due to time off work. Since the insured is required by the policy conditions to cooperate with the insurer in the investigation, settlement, or defense of any claim or lawsuit, it is very appropriate for the insurer to pay the insured’s reasonable expenses in such cooperation. This raise the question: What is a “reasonable expense”?”And is $25 a day “or time off work an acceptable sum?
Not all court costs are covered.
Court costs taxed against the insured are another item included in the supplementary payments. The current commercial general liability (CGL) form and the current business auto policy (BAP) note that these costs do not include attorneys’ fees incurred against the insured. This means that the attorneys’ fees and eattorneys’ opposing counsel that may be taxed against the insured are not covered as supplementary payments. By excluding opposing attorneys’ fees and attorneys’ supplementary payments, these fees and expenses can be viewed as damages the insured is obligated to pay for the bodily injury or property damage claims. The fees and expenses are then paid from the policy’s insurance limits.
Judgment liability
Interest on the full amount of any judgment against the insured that accrues after entry of the judgment is part of the supplementary payments section of all the liability policies. Normally, after a judgment is rendered against the insured, the court will allow interest to accrue on the amount due until the judgment is satisfied. Since the insurer may appeal the judgment, it only fits that the insurer also pays any interest accruing on the judgment amount while the appeal process proceeds. Note, however, that the policies do limit this interest payment in certain ways.
The CGL form also has this limitation on interest payments after the entry of any judgment. Still, it offers a supplementary payment that other liability policies do not cover. The CGL form provides for payment of prejudgment interest awarded against the insured. If the insurer makes an offer to pay the applicable limit of insurance, the insurer will not pay any prejudgment interest for that period after the offer is made.
The final point to note about supplementary payments (and the most rewarding from the insured’s standpoint) is that they do not reduce the limit of liability. The supplementary payments are in addition to the policy’s limits of liability
As noted, the supplementary payments clauses are an integral part of the liability policy, and as part of the insurance contract, both insureds and insurers need to recognize their importance.
