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If your company uses AI, there’s a fair chance your insurance policy has a new opinion about it. AI liability insurance has become one of the odder corners of the business world this year: some carriers are writing AI out of standard policies, others are selling AI-specific cover, and plenty of insurers admit they don’t yet know how much AI risk they’re already holding.
This guide to AI liability insurance explains what the new exclusions say, which policies they touch, where insurers disagree with each other, and what a business can do before its next renewal.
What the new AI exclusions say
The best-known examples come from the Insurance Services Office, or ISO, which publishes standard policy forms that many insurers copy. According to a client alert from the law firm Shumaker, Loop & Kendrick, one ISO endorsement, CG 40 47 01 26, excludes bodily injury, property damage and personal and advertising injury “arising out of, or attributable to, generative AI.” Related forms, CG 40 48 and CG 35 08, were developed so carriers can exclude generative AI exposures from general liability and from products and completed operations coverage. The forms took effect in January 2026.
Then there’s Berkley’s “absolute” AI exclusion, used in several specialty liability lines. The same alert warns that it may reach the actual or alleged use, development, integration or failure of AI. That’s far wider than content an AI tool produces. Wording like this matters, because a broad exclusion can swallow a claim that only loosely involves AI.
How widespread is it? Global Finance magazine reported on October 8 that more than 60 property and casualty carrier groups have filed to adopt some form of AI exclusion. The article didn’t name the regulators receiving those filings, and a filing isn’t the same as an exclusion landing in your policy. It does show how many insurers are at least preparing for it.
Which policies are affected
This isn’t limited to one kind of policy. The law firm lists commercial general liability, cyber and media, D&O, errors and omissions, intellectual property and commercial crime, among others. Global Finance says the squeeze is tightest on D&O, E&O, employment practices and fiduciary lines. Cyber is steadier: many carriers still cover AI-enabled threats such as deepfake fraud.
The law firm also sketches how an insurer might deny a claim. It could say an AI error wasn’t an “occurrence” because the tool was deployed on purpose. It could point to a professional services exclusion. Or it could argue that a cyber policy covers hacks, not model failures or hallucinations. The article cites no actual denied claims, so these are risks, not precedents.
AI liability insurance isn’t one market yet
Here’s the part that surprises people about AI liability insurance. At a wholesale insurance conference in San Diego, several specialty insurers told Business Insurance they weren’t planning to adopt ISO’s exclusions, and some saw a business opportunity in covering AI instead. The October 15 report quoted Admiral Insurance’s Nir Gabay saying underwriters are asking how professionals use AI, and watching for people who rely on it instead of their own judgment. CFC, a managing general agent, has built affirmative AI coverage into many of its policies and asks applicants what controls they have.
Others were frank about what they don’t know. AmTrust’s Erich Bublitz said most policies are silent on AI, so insurers may not know how much AI risk they’re carrying. Risk Placement Services’ Ania Caruso said court rulings will help clarify exposure and shape products, calling it “the chicken or the egg.”
The caution has reasons. Business Insurance says there’s little data on what AI losses could look like. AI liability cases have only recently started moving through the courts, and worries are growing as AI agents act more on their own. That helps explain why some carriers reach for exclusions while others sell AI liability insurance as a product.
A separate market is forming too. Global Finance names standalone carriers including Armilla, Mayflower Specialty, Embroker and Corgi. It says Munich Re began offering its aiSure coverage suite in February. Limits on standalone policies run from $2 million to $50 million, though the article gives no prices.
What to do about AI liability insurance before renewal
None of this is legal or insurance advice, and your own policy language controls. Still, the law firm’s checklist is a sensible starting point, and most of it costs nothing but time.
Start by listing every way AI shows up in your business: tools built into vendors’ software, plus the public chatbots employees use on their own. Match each use to what could go wrong, such as exposed data, bad advice, copyright claims or payment fraud. Then ask your broker to review AI exclusions across the whole program, not just one policy, and to do it at renewal rather than after a claim.
Negotiation matters too. The alert suggests pushing for narrower causation language, carve-backs for ordinary business operations, and preserved cover for cyber, privacy and defense costs. Vendor contracts deserve a read alongside the insurance, since liability caps there can leave gaps. And write down your governance. Testing, human review and vendor oversight are the kinds of controls underwriters may ask about.
What to watch in AI liability insurance
The first big court decisions on AI coverage disputes will do more to settle this than any form filing. Watch also whether more insurers follow ISO’s wording or the specialty carriers that are choosing to cover AI. For an example of how legal and financial pressure can reshape an AI company, see our coverage of the Character.AI bankruptcy.
Editor’s take
Read the current market for AI liability insurance as AI risk being priced in real time. Your policy may not say which way a given insurer has landed, and a quiet policy isn’t a safe one. If silence is the default, a claim is when you’ll find out what it means. Ask your broker for a plain answer in writing about how your coverage treats AI, before the renewal paperwork arrives rather than after something goes wrong.
