Top Five Issues In-House Counsel Must Recognize About Insuring Artificial Intelligence Risks

You can’t avoid the new world of artificial intelligence, but as in-house counsel, you can prepare your company to face its risks and rewards. Understanding how your company’s insurance portfolio stands up against the possible liabilities of AI is more important than ever; here are the top five issues to consider now.

1. Liabilities Are Here and Growing. Liabilities arising from AI are no longer hypothetical. Companies already face claims for discrimination, bodily injury, property damage, reputational injury, data privacy violations, and securities fraud. Courts are only beginning to grapple with these cases, but the trend line is clear: AI is creating real, costly, and rapidly expanding categories of exposure.
2. Existing Policies Provide Some but Incomplete Protection. Current insurance portfolios may provide partial protection against AI risks, but the coverage is inconsistent.  General liability policies may cover bodily injury or reputational harm, while D&O policies may respond to securities-related exposures. Employment practices liability policies may extend to discrimination claims, and cyber or technology E&O policies can respond to data misuse or system failures.  Each of these policies, however, has limitations and exclusions that make them imperfect solutions for the breadth of AI risks now emerging.
3. Coverage Gaps Are Emerging. In view of these emerging risks, many insurers are rapidly adopting AI-specific exclusions and limitations, narrowing coverage that might otherwise apply.  Some bar coverage for content created with AI, while others broadly exclude claims tied to AI decision-making or recommendations. These exclusions are appearing across multiple product lines, reducing the reliability of traditional coverage at the very moment AI liabilities are growing.
4. New Insurance Solutions Are Developing. Just as the technology and liability landscape relating to AI is rapidly evolving so too is the insurance market.  Insurers are experimenting with products designed to address AI risk directly.  Carriers have introduced policies that affirmatively cover certain AI exposures.  Specialty startups also are introducing warranties and tailored AI coverage solutions.  These new options often come at higher cost, but they may become the only way to ensure reliable protection in areas where traditional policies no longer apply.
5. Mapping AI Use to Coverage Is Essential. The most effective step for in-house counsel is to understand how AI is being used throughout the organization, including by third-party vendors, and to evaluate the liabilities those uses create. That analysis should then be mapped against the existing insurance portfolio to highlight gaps and exclusions.  Working with brokers and coverage counsel to pursue terms or explore new products is critical to ensuring that coverage keeps pace with technology.

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