When the Tool Becomes the Liability: AI and the Quiet Gaps Forming in Your Insurance Program

Published in All Insurance Industry Insights on Thursday, June 11, 2026 by Jay Schares

Artificial intelligence is no longer an emerging trend; it has become a core part of how modern businesses operate. As organizations integrate AI into everyday workflows, many have overlooked a critical question: whether their insurance coverage and risk management strategies have kept pace. This disconnect is creating hidden vulnerabilities, as insurers move to redefine coverage boundaries and businesses face new, often unrecognized exposures tied to AI use. 

AI Adoption Is Outpacing Risk Planning 

AI has rapidly become embedded in everyday business operations, from marketing and hiring to customer service and analytics even in companies that do not consider themselves tech driven. However, most organizations adopted these tools quickly without reassessing whether their insurance and risk management strategies could manage the new exposure. As a result, many policies in place today were designed before AI became commonplace, creating a growing gap between real-world operations and what coverage addresses. 

Insurance Is Actively Excluding AI Risks 

The insurance market has begun responding by introducing exclusions that limit or remove coverage for AI-related incidents. New endorsements, such as CG 40 47 and CG 40 48, are designed to carve generative AI out of standard commercial general liability policies, while similar exclusions are emerging through professional liability and directors’ and officers’ coverage. At the same time, “silent AI” risks, where claims were historically covered because AI was not explicitly excluded, are disappearing. This creates uncertainty about which policy, if any, would respond when AI causes harm, leaving businesses vulnerable to uncovered claims. 

Managing AI Risk Requires Intentional Action 

AI exposure now extends beyond direct use to include vendors and partners who integrate AI into their services. Insurers are increasingly evaluating whether companies have governance practices in place, such as oversight, policies, and data controls. Encouragingly, specialized AI insurance products are emerging to fill coverage gaps. To stay protected, businesses should invent AI using across operations, review policies for exclusions, implement governance frameworks, and work with brokers to secure appropriate coverage, treating AI not as a passive tool, but as a defined and managed risk. 

If you have questions about your insurance policy or want a better understanding of your current risk, our team is here to help. Feel free to reach out to Jay at 319-296-7014 or jschares@pdcm.com.

Written by
Jay Schares