AI Liability Insurance

The AI coverage gaps

As businesses adopt generative and agentic AI, they face exposures ranging from inaccurate outputs and data leakage to regulatory violations and intellectual property claims. At the same time, new AI-specific exclusions may limit coverage under traditional policies, making it increasingly important for businesses to identify potential gaps and evaluate whether specialty AI liability insurance coverage is appropriate.

Our latest research guide, ISO AI Exclusions: AI Liability Insurance – A New Market of Risk, takes a closer look at what these new exclusions mean for your business, the specific AI-related risks driving them, and how specialty AI liability coverage can help fill the gaps. Fill out the form below to get a free copy.

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What Is AI Liability Insurance?

AI liability insurance is an emerging category of coverage designed to address liabilities arising from the development or use of artificial intelligence. AI liability insurance can be obtained through traditional liability policies or as a specialty standalone AI policy.

AI liability insurance coverage varies depending on the carrier and form used. It may provide coverage for:

• Regulatory violations
• Privacy or data leakage
• Other third-party liabilities stemming from AI use

However, a policy that provides AI coverage may not cover all of these exposures. Businesses should review actual terms, conditions, limits and exclusions rather than relying on the product category alone.

What Risks Does Generative AI Create for Businesses?

Generative AI is a type of artificial intelligence that learns patterns from existing data to generate new content or responses, such as text, images, audio, video or code.

Generative AI is used in a wide variety of ways. As a result, the risks posed by AI are also varied and may include:

• AI bias and discrimination.
• AI washing and management liability.
• Regulatory and compliance violations.
• Bodily injury and property damage.

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Does Business Insurance Cover AI-Related Losses?

Traditional business insurance policies may provide coverage for some AI-related losses, but businesses should not assume that existing insurance policies automatically cover every AI exposure. Generative AI insurance coverage depends on the type of policy, the circumstances of the claim, and applicable exclusions and endorsements.

Until recently, insurance policies were largely silent on AI-related exposures. However, three new endorsements from ISO have emerged to clarify coverage for generative AI risks:

1. CG 40 47 excludes coverage under Coverage A and Coverage B of commercial general liability insurance for bodily injury, property damage and personal and advertising injury arising out of generative AI.
2. CG 40 48 excludes coverage under Coverage B of commercial general liability insurance for personal and advertising injury arising out of generative AI.
3. CG 35 08 excludes coverage for bodily injury and property damage arising out of generative AI under the Products/Completed Operations Coverage Part.

For more information, read New ISO AI Exclusions: What Businesses Need to Know.

Do You Need Standalone AI Insurance?

As companies incorporate AI into their daily operations, it’s important to consider whether standalone AI insurance is appropriate. Ultimately, whether or not standalone coverage is necessary depends on your specific circumstances.

• How extensively does your organization use AI? Greater use can create greater exposure to AI-related risks.
• Is AI customer-facing? Customer-facing AI tools can expose companies to prompt injection risks while making it harder to maintain oversight.
• Does AI make or influence decisions? If AI plays a significant role in employment or business decisions, there is a risk for AI-related claims.
• Are autonomous or agentic systems being used? AI agents that act outside their intended parameters can lead to significant losses.
• Is sensitive or regulated data entered into AI tools? AI-related data breaches can expose companies to additional liability.
• Does AI affect professional advice or services? AI may provide incorrect advice or contribute to services that fail to meet professional standards.
• Can AI affect physical systems? If AI controls building systems, production, equipment, or transportation, there is a chance for property damage or bodily injury.
• What coverage already exists elsewhere in your insurance program? You may already have coverage for some AI-related risks in existing policies. However, new exclusions may create gaps that warrant consideration of standalone coverage.

Protect Your Company Against AI-Related Exposures

As AI becomes more embedded in your operations, your insurance program needs to keep pace. Heffernan Insurance Brokers can help you identify AI-related exposures, review existing policies and exclusions and determine whether coverage gaps require additional protection.

Contact us to review your company’s AI risk and insurance coverage

AI Liability Insurance FAQs