AI Exclusions in Insurance: Why Cyber Coverage Still Holds Strong

Estimated reading time: 2 minutes

We scour the internet for perspectives on cyber insurance. This morning, we came across a timely Iowa Bar Blog post: “AI exclusions are creeping into insurance: But cyber policies aren’t the issue (yet).”

Cyber Insurance Holds Firm

Artificial intelligence is reshaping risk management, and insurers are rewriting policies. Cyber insurance remains stable. The blog notes, “Cyber insurers aren’t running for the hills.” Some even add endorsements confirming coverage for AI incidents.

Deepfakes and phishing remain risks, but insurers see them as familiar threats.

AI Exclusions Spread Across Policies

The exclusions are showing up elsewhere. The authors write, “Management liability, directors and officers (D&O), errors and omissions (E&O), employment practices, fiduciary, and crime coverage are all beginning to include sweeping AI exclusions.”

Some exclusions are alarmingly broad. One example: “any actual or alleged use, deployment, or development of Artificial Intelligence.” That language could exclude claims ranging from résumé-screening disputes to fiduciary duty allegations.

Silent Risk Shifts to Firms and Clients

The authors caution that this risk shift often happens without firms realizing it. Policies may silently deny coverage if AI played any role in a dispute.

Lawyers Must Act

Lawyers should take two steps. First, review their own firm’s policies. Second, advise clients to identify and negotiate AI exclusions before they create exposure.

The blog warns, “We’ve seen this movie before. ‘Silent cyber’ risk crept into property and liability policies, sparking disputes about whether losses were covered.” The same trend now threatens AI-related claims.

The Takeaway

Cyber insurance remains reliable, but vigilance is essential. Firms should review coverage this quarter. Exclusions are appearing fast, and without attention, AI tools could become the reason a claim gets denied.

Read the full article on the Iowa Bar Blog for deeper insights.

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