Insurer Interest in AI Exclusions Growing as Risk Becomes Omnipresent

It’s no surprise given the penetration of artificial intelligence into lives and businesses that it appears insurers are gearing up to exclude artificial intelligence risk in some of their commercial liability policies.

Three ISO exclusions have garnered more interest from carriers, according to an attorney who practices in the cyber space and an expert who helped write the exclusions.

“There’s been a major shift in the insurance industry’s treatment of AI-related risks and insurers are moving very quickly to limit this exposure,” said Alana McMullin, a partner in Lathrop GPM, whose practice focuses on defending clients in complex insurance disputes, products liability and toxic tort litigation, as well as general liability matters.

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She has seen carriers increasingly submit filings with state insurance regulators to be able to use three ISO endorsements. ISO parent Verisk provided the following paraphrased description of the endorsements:

• Generative Artificial Intelligence Endorsement CG 40 47: This endorsement excludes coverage for bodily injury, property damage and personal and advertising injury arising out of generative artificial intelligence for the Commercial General Liability Coverage Part. It contains a definition of generative artificial intelligence.
• Generative Artificial Intelligence (Coverage B Only) Endorsement CG 40 48: This endorsement excludes coverage for personal and advertising injury arising out of generative artificial intelligence for the Commercial General Liability Coverage Part. It contains a definition of generative artificial intelligence.
• Generative Artificial Intelligence Endorsement CG 35 08: This endorsement excludes coverage for bodily injury and property damage arising out of generative artificial intelligence applicable to the Products/Completed Operations Coverage Part. It contains a definition of generative artificial intelligence.

“These ISO exclusions were the spark of this AI exclusion boom that’s happened now, and that’s what we’re seeing is we’re in the middle of what I’d call an industry-wide reaction to the explosion of AI,” she said.

She believes the increase in filings for the exclusions is likely a prelude to adopting them soon. But how widely they’re used may not be known for some time, at least until renewals start to come in.

“Insurers are still evaluating their options in real time, so we don’t know yet what each insurer is going to do in regard to AI exclusions or how broad their exclusions are going to be, or necessarily what lines of coverage are going to contain these exclusions,” McMullin said. “We just don’t know. But if history is any guide, we expect and anticipate rapid adoption of some version of an AI exclusion and most lines of coverage.”

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Joe Lam, vice president of liability at Verisk, who helped write the ISO endorsements, said he’s been having more conversations with carrier clients about them. However, he added, any new exclusions they introduce tend to garner a lot of interest.

“I would say there’s a high degree of interest whenever we introduce a new endorsement, whether it is a coverage endorsement or an exclusion where we would have the opportunity for our customers to engage on that new material,” he said. “Everyone acknowledges that this is new technology that is going to create or introduce new exposures that were never contemplated before, so they are all appreciative of having additional underwriting flexibility to address any type of you emerging issue.”

He didn’t know how many insurers are adopting them yet, but he said he expects the exclusions to help create stability in the market.

“Because at the end of the day it’s insurance, and it is an exchange of a carrier picking up the exposure in exchange for premium and it has to be an understanding of a carrier is willing to accept that exposure for the premium that is being collected,” Lam said. “Without exclusions to allow underwriters a level of stability or to accept a risk, you run into a situation where they might just walk away from the risk, so exclusions are very essential in the marketplace.”

As things stand currently, insurers may already be offering what could be considered silent coverage for AI risks. Because, according to McMullin, traditional liability policies may cover the risk because if is not explicitly excluded.

It may sound like a good bet the exclusions will be broadly adopted, but she believes some carriers may go in another direction.

“Insurers have plenty of reasons to hesitate in adopting these broad exclusions for AI risks, including market pressure, right? Aggressive exclusions may make their policies less attractive, especially given the pervasive nature of AI in today’s business environment, in every business operation, in our daily lives,” McMullin said. “We may also see insurers who take advantage of the uncertainty in the market, the uncertainty with the AI risks, and choose to underwrite and price the risks probably for an additional premium rather than exclude them.”

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Insurers may still be figuring out what they want to do, but it’s policyholders who may have the most influence over how many carriers adopt the AI exclusions through policy buying and in negotiations during renewals.

“All of these things are going to factor into who we’re seeing actually implement these policy exclusions, how often they are implemented, what lines of coverage, all of those things are going to go into it,” McMullin said.

There’s another AI exclusion out there that has gotten some attention: Berkley’s absolute AI exclusion introduced last year for use in directors and officers, errors and omissions, and fiduciary liability insurance products.

It excludes the insurer from being liable for use or development of AI, including the generation, creation, or dissemination of content or communications using AI, as well a policyholder failing to identify content from a third-party’s use of AI. It also excludes an insured’s policies and procedures relating to AI, an insured’s breach of any duty or legal obligation with respect to the use of AI.

A spokesperson for Berkely was reached out to with questions about the exclusion.

McMullin said lawsuits involving AI have been on the rise, offering more motivation for using the exclusions.

“Although AI is this evolving landscape and exposure is very novel, the liabilities in that space have been more prevalent,” McMullin said.

According to a recent Gallagher study, there was a 978% increase in AI-related lawsuits from 2021 to 2025, and a 137% increase from 2024 to 2025. The study shows patent infringement claims accounted for 11.9% of cases, challenging how AI systems are built, process information and the functionality they deliver. Copyright infringement claims comprised 11.2% of cases and personal injury claims (privacy violations, misuse of personal data, digital dignity) made up 10.2% of the cases.

To date, most AI-related litigation has centered on intellectual property infringement, privacy violations, discrimination, consumer protection, and securities-related claims, according to McMullin.

“We’ve seen these lawsuits that have been filed relating to AI, a lot of which incorporates disclosure issues, violations of policies governance, things to do with a company’s use of AI and its disclosures to its shareholders things like that,” she said. “It’s representations, so we’re looking in that space, we think that potentially the E&O and D&O space, the policy lines of coverage are going to be the first lawsuit that the potential type of coverage is going to expand the AI exclusion more aggressively and put this exclusion into practice and potentially have to be litigated when claims are denied.”

It’s difficult for McMullin to predict where AI in insurance and legal cases will be in months or years down the line, since there’s yet to be a bellwether case that would indicate how courts and insurers will interpret these AI exclusions and new developments in AI seem to be coming almost daily.

“But what I can say is that given this uncertainty, it’s policyholders who need to be proactive and understanding their potential for AI risks and use other avenues of risk mitigation to close gaps that may potentially be there in coverage,” she said.