AI exclusions in business insurance just landed at three of the largest commercial carriers in America. Berkshire Hathaway, Chubb, and Travelers were quietly approved this month to drop AI-related damages from corporate insurance policies. The carveouts include claims like AI agents misusing copyrighted material in marketing, hallucinated outputs that damage third parties, and autonomous-agent decisions that cost businesses real money. Dr. Alex Wissner-Gross flagged the development in The Innermost Loop on April 27, 2026, and it is the most consequential business-insurance story of the year. If your company uses any AI tool — and at this point, it does — your coverage just changed in a way you almost certainly have not been told about.
What AI Exclusions in Business Insurance Mean for Your Company
For two decades, commercial general liability, errors-and-omissions, cyber, and media-liability policies have quietly absorbed a wide range of “new technology” risks under generally worded grants of coverage. When something went wrong with email, the cloud, a SaaS tool, or a vendor data breach, businesses fought over coverage — but they at least had a starting point.
That era is ending. Carriers have been telegraphing this for eighteen months, and regulators have now signed off. The new AI exclusions in business insurance language does not say “we will not cover AI.” It says something subtler and more dangerous: claims arising from the use, deployment, or output of artificial intelligence systems are excluded from coverage — including indirect claims that touch AI anywhere in the chain of causation.
Read that twice. If your sales team uses an AI agent to draft a customer email and the email contains a hallucinated claim about your product, the resulting misrepresentation suit may now be uninsured. If your marketing team uses generative AI for ad creative and a copyright holder sues, your media-liability policy may be silent. If your finance team automates accounts-payable triage with an AI vendor and that vendor’s model approves a fraudulent invoice, your crime and cyber policies may both decline. The exposure is not theoretical. It is a clean carveout, written by the carriers’ own counsel, blessed by state insurance departments. The NAIC has been tracking these filings for over a year.
The blunt summary: the cost of an AI-related claim has just shifted from the insurance balance sheet to your balance sheet. Most companies have not priced this in.
The Legal Impact of AI Exclusions in Business Insurance
The legal work this exclusion creates lands in five places at once, and each one is a Howard East practice area.
Corporate and contract review
Every vendor agreement that touches AI — your CRM, your marketing automation, your support platform, your code-generation tools — needs an indemnification audit this quarter. The standard “vendor will indemnify customer for IP infringement and gross negligence” language was written for a world in which the vendor’s insurance picked up the loss. If that insurance no longer responds to AI-driven claims, the indemnity is paper. You need contractual minimum-coverage representations that survive carrier exclusions, and you need to add explicit AI-specific representations and warranties to your master services agreements — the AI exclusions in business insurance now reshape the entire vendor risk surface.
Mergers and acquisitions
Diligence checklists will need an immediate update. Acquirers should be asking two new questions of every target: (1) which AI systems are embedded in your operations, and (2) which of your insurance towers — primary, excess, cyber, E&O, D&O — carve out AI-related claims? A target with deep AI integration and a freshly excluded coverage tower is carrying contingent liabilities the seller may not have disclosed. Reps and warranties insurance underwriters are already pricing AI exclusions in business insurance into their underwriting; we expect the exclusion to begin appearing in standalone R&W carveouts within two quarters. Our M&A practice is updating its standard checklist this week.
Healthcare and regulated industries
The exposure is acute for any business using AI for clinical decision support, claims processing, prior authorization, or patient communications. A failure-to-cover scenario in a malpractice or HIPAA breach context is a different category of business risk than a marketing copyright claim. Healthcare clients should be reviewing their professional liability policies this month, not at renewal. Cannabis operators face a parallel exposure on regulated-industry coverage; Collateral Base is running a parallel review for licensed operators using AI in compliance, and Cannabis Industry Lawyer is tracking carrier exclusions on cannabis policies specifically.
Employment
AI hiring tools, productivity monitoring, and performance evaluation systems are already generating discrimination and wage-and-hour exposure. With EPLI carriers now free to apply AI exclusions in business insurance to claims against employers, companies face a coverage gap on a class of risk that is growing fastest of all. The EEOC’s guidance on AI in employment decisions already puts employers on notice; the loss of EPLI coverage compounds the exposure.
IP and partnership disputes
The most-cited exclusion — agent misuse of copyrighted material in marketing — sits squarely on Howard East’s bench. Expect more standalone copyright claims, more contribution actions against AI vendors, and more partner-on-partner disputes when one founder’s AI experiment generates a third-party lawsuit the firm now has to fund out of operating cash.
The through-line is simple: risk that used to be transferred is now retained, and the contracts written under the old assumption no longer perform the work they were supposed to do.
Three Steps to Close the AI Exclusions in Business Insurance Gap
Three steps, in order, before your next renewal.
First, request the current declarations page and full policy form from your broker for every commercial line — CGL, E&O, cyber, EPLI, D&O, media, and umbrella. Ask in writing: Has any AI-related exclusion been added or proposed for our next renewal? Get the answer in writing, too. If the broker hedges, escalate to the carrier directly. The new AI exclusions in business insurance language can hide in endorsements, schedules, or policy-form revisions that don’t appear on the dec page.
Second, inventory the AI tools in active use across your business — including the ones your team adopted without asking. You cannot allocate risk you cannot see. Howard East can run this audit alongside the policy review and produce a one-page exposure map for the board.
Third, call us before you sign anything new. Vendor renewals, customer agreements, partnership documents, and acquisition LOIs all need fresh eyes that account for AI exclusions in business insurance. We are revising our standard AI-rider language this week, and we are happy to walk you through the changes.
The carriers moved first. The contracts have not caught up. We can fix the contracts.
Talk to Howard East about an AI Coverage and Contract Audit. A focused engagement — fixed-fee, two-week turnaround — that covers your policy review, vendor inventory, contract templates, and a board-ready risk memo. Schedule a call.
This article is for informational purposes only and does not constitute legal advice. Coverage interpretations depend on the specific policy language, jurisdiction, and facts of any claim. Consult Howard East before relying on any of the analysis above.
Source: Dr. Alex Wissner-Gross, “Welcome to April 27, 2026,” The Innermost Loop.
