AI exclusions and insurance policy wording
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AI-related insurance questions turn on the relationship between coverage grants, definitions and exclusions. In Citizens v. Wynndalco, a dispute involving facial-recognition technology, the Seventh Circuit read a statutory-violation exclusion against the coverage promised elsewhere in the policy. Express AI endorsements add another layer of wording to examine.[1][2]
An express AI exclusion
Berkley's sample PC 51380 00 (06-24), titled Artificial Intelligence Exclusion (Absolute), identifies amendments to PC 51000 DO, EPL and FLI, each edition 02-18. Its scope includes AI-related conduct, disclosures, regulatory violations and demands to address AI risks. Its AI definition encompasses systems producing predictions, recommendations and decisions as well as synthetic content.[2]
It also reaches alleged third-party AI use and failures to detect AI-generated content. The sample's insured, policy number and effective date are blank; application to an issued policy requires separate evidence.[2]
Compare different kinds of documents
| Document | What it establishes | Reading question |
|---|---|---|
| Berkley PC 51380 00 (06-24) | Wording of a specified AI exclusion endorsement.[2] | Which coverage parts and claims does the endorsement reach? |
| Travelers CYB-16002 (06-20) sample | Separate technology, media, privacy/security and fraud insuring agreements; only agreements with limits in the declarations apply.[3] | Which insuring agreements were actually purchased? |
| Munich Re aiSure product description | The provider describes AI performance warranties and deployer coverage options.[4] | What performance trigger and loss measure appear in the issued contract? |
These documents serve different purposes: an endorsement changes specified policy terms; a sample illustrates a policy structure; and a product description identifies an offering. Policy review should establish the issued form and edition, the declarations, attached endorsements, policy period, governing jurisdiction and the loss alleged. California's commercial-insurance guide explains how exclusions and endorsements affect the coverage purchased.[5]
Coverage grants and exclusions together
The Wynndalco court concluded that the breadth of the exclusion before it created ambiguity because it appeared to remove coverage otherwise granted. Applying Illinois rules of interpretation, it construed that ambiguity in favor of the insured and required a defense. The decision addressed the wording of a statutory-violation exclusion in a business owner's policy. Its reasoning is useful when studying policy structure, while interpretation of a newly drafted AI exclusion requires analysis of that exclusion's own text and applicable law.[1]
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References
- ↑ 1.0 1.1 U.S. Court of Appeals for the Seventh Circuit, Citizens Insurance Company of America v. Wynndalco Enterprises, LLC, No. 22-2313, opinion of June 15, 2023
- ↑ 2.0 2.1 2.2 2.3 Berkley Insurance Company, Artificial Intelligence Exclusion (Absolute), PC 51380 00 (06-24), pp. 1–2 (copy hosted by Hunton)
- ↑ Travelers, CyberRisk Tech Coverage, sample CYB-16002, edition 06-20
- ↑ Munich Re, aiSure: AI risk-transfer products
- ↑ California Department of Insurance, Commercial Insurance Guide (2024), commercial general liability and policy conditions