It should come as no surprise that the insurance industry is also being reshaped by the rapid evolution of AI. As these changes accelerate, insurers are confronting a fundamental question that, until recently, had not been a significant or widespread concern: How should insurance respond when AI causes or contributes to a loss?
Insurers are beginning to define, limit, or exclude AI-related exposures under policies currently available in the market, while also developing affirmative AI coverages to address risks that fall outside traditional insurance products. The result is an insurance marketplace that is rapidly changing and remains largely untested in its response to AI-related claims.
In today’s market, many common business insurance coverages, including commercial general liability, commercial auto, and employer’s liability, are addressing AI-related claims through policy form revisions or new endorsements that introduce specific exclusions. In parallel, many insurers have begun filing with state regulatory agencies to adopt AI exclusions across a wide range of insurance lines.
Likewise, in January 2026, the Insurance Services Office (ISO), a provider of statistical data, underwriting information, and analytics for the insurance industry, introduced three endorsements to the commercial general liability policy form that exclude coverage for damages arising from AI-related claims (CG 35 08; CG 40 47; CG 40 48). Some carriers are also adding explicit AI and cyber exclusions to updated builder’s risk policy forms. While anecdotally it does not appear that insurers have immediately implemented most of these exclusions, contractors should expect them to be introduced more widely over time, particularly at renewal.
Historically, exclusions in one type of insurance coverage have helped shape the availability and scope of other coverages. For example, most commercial general liability insurance policies exclude professional negligence, while professional liability policies are designed to address that exposure. AI is now driving a similar evolution.
Cyber liability insurance is one area where at least partial coverage for AI-related claims may be available. Some cyber liability policies now include express AI-affirmative endorsements that seek to address and define AI-related claims from a cyber liability standpoint.
Unfortunately, as AI becomes more pervasive in construction and other businesses, the range of claims that may be attributable to its use will also expand. As a result, cyber liability policies, at least in their current form, may not be sufficient to address the full range of claims arising from AI.
In part because of the increasing breadth of AI use, insurers are, for the first time, developing new products specifically designed to cover exposures arising from the use of AI. The coverage contemplated by these new policies includes claims involving intellectual property infringement, bodily injury or property damage caused by a deployed AI system; data disclosures by AI, financial loss resulting from errors in AI-generated output; and regulatory action caused by AI’s violation of law.
As insurers implement AI exclusions and develop AI-related insurance products to address these new claims, questions will arise as to how those exclusions and coverages will be interpreted, particularly when it is unclear whether a claim falls within, or just outside, the scope of coverage. These changes can lead to unexpected claim denials, unintentional gaps or narrowing of coverage, and more litigation. For example, despite having been in use for more than 40 years, the “your work” exclusion in commercial general liability policies has been the subject of hundreds of coverage disputes.
Because the ways in which AI is used are quickly evolving, and AI-related policies and exclusions remain largely untested, contractors should expect insurance coverage in this area to continue changing rapidly.
Contributor
Jeremy Gaddy, VP