AI Exclusions in Insurance Spark Coverage Uncertainty Beyond Cyber Policies

Artificial intelligence is increasingly raising red flags in insurance contracts, but contrary to popular belief, it’s not cyber policies leading the charge. Carriers are largely maintaining or clarifying AI coverage in cyber insurance, while more ambiguous and sweeping exclusions are emerging in management liability, professional indemnity, and crime policies. This shift could have major implications for claims professionals evaluating coverage in the wake of AI-related losses.

According to industry insights from Johnson Kendall Johnson’s Alexandra Bretschneider, cyber underwriters are doubling down on clarity—explicitly affirming that AI-originated threats like deepfakes or automated frauds are covered. But the real ambiguity arises outside of cyber. Broad AI exclusions with little definitional guidance are starting to appear in D&O, E&O, employment practices, and fiduciary coverage. These exclusions could potentially deny claims tied to AI-driven decision-making, automation errors, or operational failures.

For claims adjusters, the implications are significant. AI is amplifying traditional exposures, yet exclusions are being written in sweeping terms that may not distinguish between cause and consequence. Evaluating coverage will increasingly require attention to the processes organizations use to validate AI outcomes, track employee behavior, and secure sensitive data.

At the same time, standalone AI insurance products remain rare and narrowly tailored. Until broader market solutions emerge, adjusters must scrutinize how existing policy frameworks absorb—or exclude—AI risks. From renewal negotiations to loss adjudication, AI is becoming a defining feature in how claims are assessed, contested, and settled.