Underwriters are quickly adding exclusions as courts start to hold companies responsible for harm from AI tools.

Law firm Lander & Rogers says there is potential for systemic loss across many insureds simultaneously through the use of artificial intelligence at workplaces.

Insurers are moving to control exposure, and insureds that do not review their liability programs may discover the gap only after a claim, it warns. 

Boards should map how AI is being used across their organisations, and where it influences decisions and outcomes rather than merely supporting workflow. 

“Insurers are increasingly signalling that AI-related losses may be foreseeable and avoidable or expressly excluded,” the law firm said. 

“Proactive oversight of both AI risk and insurance response is quickly becoming a key component of effective corporate governance.” 

AI exclusions may let insurers deny claims that arise from AI-generated content under defamation or intellectual property infringement; losses linked to errors in AI-driven decision-making; or claims that can be traced to autonomous system outputs rather than employee actions. 

“It is likely that these sorts of exclusions will become more common and will lead to insurers offering AI-specific endorsements or standalone cover,” Lander & Rogers said. 

“This mirrors the early days of cyber risk, where losses were unintentionally picked up under legacy wording. The ‘silent cover’ position is changing.” 

Lloyd’s-backed start-up Armilla has launched dedicated AI liability cover for algorithmic failures, covering issues such as AI model errors and “hallucinations”. 

For now, injury, damage or loss driven by an AI system may be treated the same way as any other defective product or operational failure. But the law firm says companies cannot assume AI is covered just because there is no specific exclusion.  

“Silent coverage is starting to be closed off by insurers as claims volume and systemic risk become clearer. 

“As AI exclusions proliferate, boards are increasingly expected to understand what AI systems have been deployed.  

“They are also being expected to know where insurance coverage begins/ends and demonstrate active oversight of AI risk and disclosures. 

“Insurers and regulators alike are signalling that AI governance failures may be foreseeable and uninsured, rather than accidental.” 

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