{"id":132420,"date":"2025-09-02T14:31:47","date_gmt":"2025-09-02T22:31:47","guid":{"rendered":"https:\/\/xira.com\/p\/2025\/09\/02\/ai-exclusions-are-creeping-into-insurance-but-cyber-policies-arent-the-issue-yet\/"},"modified":"2025-09-02T14:31:47","modified_gmt":"2025-09-02T22:31:47","slug":"ai-exclusions-are-creeping-into-insurance-but-cyber-policies-arent-the-issue-yet","status":"publish","type":"post","link":"https:\/\/xira.com\/p\/2025\/09\/02\/ai-exclusions-are-creeping-into-insurance-but-cyber-policies-arent-the-issue-yet\/","title":{"rendered":"AI Exclusions Are Creeping Into Insurance \u2014 But Cyber Policies Aren\u2019t The Issue (Yet)"},"content":{"rendered":"

Ed. note<\/u>: This is the latest in the article series,\u00a0Cybersecurity: Tips From the Trenches<\/strong>,<\/em>\u00a0by our friends at\u00a0Sensei Enterprises<\/a>, a boutique provider of IT, cybersecurity, and digital forensics services.<\/em><\/p>\n

Artificial intelligence (AI) is everywhere \u2014 in legal research tools, in \u201csmart\u201d assistants that draft contracts, and, if we\u2019re honest, probably in that partner\u2019s suspiciously polished brief. The legal profession can\u2019t avoid it, and neither can the insurance industry. But while cyber insurers are, somewhat surprisingly, holding firm on AI risks, other key coverage lines are quietly changing \u2014 and not in your favor.<\/p>\n

Cyber Insurers Aren\u2019t Running for the Hills<\/h2>\n

Contrary to what you might expect, cyber insurers are not panicking over AI. In fact, some are adding affirmative endorsements to confirm coverage for AI-related incidents. From their perspective, AI is less a new frontier than a turbocharged version of familiar risks. Deepfakes, social engineering, and AI-powered phishing aren\u2019t brand-new \u2014 they\u2019re just faster and harder to spot.<\/p>\n

That\u2019s not to say the consequences aren\u2019t serious. Imagine a deepfake video of your CFO authorizing a fraudulent transfer. The financial fallout and reputational damage could be immense. However, for now, cyber insurers are signaling that they anticipated this, and coverage remains in effect.<\/p>\n

Where The Exclusions Are Creeping<\/h2>\n

The real trouble starts outside cyber policies. Management liability, directors and officers (D&O), errors and omissions (E&O), employment practices, fiduciary, and crime coverage are all beginning to include sweeping AI exclusions.<\/p>\n

Some of the language is alarmingly broad. A few carriers have introduced \u201cabsolute\u201d exclusions that eliminate coverage for \u201cany actual or alleged use, deployment, or development of Artificial Intelligence.\u201d That\u2019s not a scalpel; it\u2019s a sledgehammer.<\/p>\n

Consider the implications:<\/p>\n

\u2013 A discrimination case involving an AI r\u00e9sum\u00e9 screening tool? Excluded.
\u2013 A negligence claim tied to an AI-driven contract review platform? Excluded.
\u2013 A fiduciary duty allegation that a board failed to oversee AI risks? Also excluded.<\/p>\n

Even routine disputes could devolve into arguments about whether AI played a role. The net effect is to shift risk back onto firms and their clients \u2014 often without their awareness.<\/p>\n

Why Lawyers Should Pay Attention<\/h2>\n

Lawyers need to look at this from two angles. First, as business leaders, your own firm\u2019s policies may already contain AI exclusions you haven\u2019t noticed. Second, as advisors, clients will expect you to spot these risks in their coverage. Missing them is an easy way to damage both trust and credibility.<\/p>\n

We\u2019ve seen this movie before. \u201cSilent cyber\u201d risk crept into property and liability policies, sparking disputes about whether losses were covered. Over time, insurers responded with exclusions and clarifications. AI appears to be on the same path \u2014 only the exclusions are emerging faster and with less precision.<\/p>\n

What To Do About It<\/h2>\n

Here\u2019s how firms and their clients can stay ahead:<\/p>\n

\u2013 Review policies carefully. Don\u2019t assume your existing D&O or E&O coverage includes AI-related events. Look for exclusionary language, especially vague or undefined terms.
\u2013 Push for clarity. If an exclusion exists, negotiate definitions. What exactly counts as AI? A predictive text feature? A chatbot? The less defined the term, the more room for denial.
\u2013 Explore affirmative options. Some insurers are beginning to offer endorsements or new products to cover AI-related risks. If your firm or clients rely heavily on AI tools, these are worth investigating.
\u2013 Collaborate with brokers and risk managers. They\u2019re often the first to spot emerging exclusions and can help secure coverage that matches your operations.<\/p>\n

Remain Calm and Vigilant<\/h2>\n

The good news is that cyber insurance remains a reliable option. The bad news is that exclusions are creeping across other policies \u2014 and they\u2019re being drafted broadly enough to cause serious problems down the road.<\/p>\n

So no, you don\u2019t need to panic. But you do need to pay attention. These exclusions aren\u2019t hypothetical; they\u2019re already appearing. Unless you\u2019re proactive, you may discover that the very AI tools making your firm more efficient are also the reason your insurance claim gets denied.<\/p>\n

Bottom line: review your coverage this quarter for your firm, and before AI exclusions creep any further.<\/p>\n

\n

Michael C. Maschke is the President and Chief Executive Officer of Sensei Enterprises, Inc. Mr. Maschke is an EnCase Certified Examiner (EnCE), a Certified Computer Examiner (CCE #744), an AccessData Certified Examiner (ACE), a Certified Ethical Hacker (CEH), and a Certified Information Systems Security Professional (CISSP). He is a frequent speaker on IT, cybersecurity, and digital forensics, and he has co-authored 14 books published by the American Bar Association. He can be reached at\u00a0mmaschke@senseient.com.<\/strong><\/em><\/p>\n

Sharon D. Nelson is the co-founder of and consultant to Sensei Enterprises, Inc. She is a past president of the Virginia State Bar, the Fairfax Bar Association, and the Fairfax Law Foundation. She is a co-author of 18 books published by the ABA. She can be reached at\u00a0snelson@senseient.com<\/strong><\/em>.<\/p>\n

John W. Simek is the co-founder of and consultant to Sensei Enterprises, Inc. He holds multiple technical certifications and is a nationally known digital forensics expert. He is a co-author of 18 books published by the American Bar Association. He can be reached at\u00a0jsimek@senseient.com<\/strong><\/em>.<\/p>\n

The post AI Exclusions Are Creeping Into Insurance \u2014 But Cyber Policies Aren\u2019t The Issue (Yet)<\/a> appeared first on Above the Law<\/a>.<\/p>\n

Ed. note<\/u>: This is the latest in the article series,\u00a0Cybersecurity: Tips From the Trenches<\/strong>,<\/em>\u00a0by our friends at\u00a0Sensei Enterprises<\/a>, a boutique provider of IT, cybersecurity, and digital forensics services.<\/em><\/p>\n

Artificial intelligence (AI) is everywhere \u2014 in legal research tools, in \u201csmart\u201d assistants that draft contracts, and, if we\u2019re honest, probably in that partner\u2019s suspiciously polished brief. The legal profession can\u2019t avoid it, and neither can the insurance industry. But while cyber insurers are, somewhat surprisingly, holding firm on AI risks, other key coverage lines are quietly changing \u2014 and not in your favor.<\/p>\n

Cyber Insurers Aren\u2019t Running for the Hills<\/h2>\n

Contrary to what you might expect, cyber insurers are not panicking over AI. In fact, some are adding affirmative endorsements to confirm coverage for AI-related incidents. From their perspective, AI is less a new frontier than a turbocharged version of familiar risks. Deepfakes, social engineering, and AI-powered phishing aren\u2019t brand-new \u2014 they\u2019re just faster and harder to spot.<\/p>\n

That\u2019s not to say the consequences aren\u2019t serious. Imagine a deepfake video of your CFO authorizing a fraudulent transfer. The financial fallout and reputational damage could be immense. However, for now, cyber insurers are signaling that they anticipated this, and coverage remains in effect.<\/p>\n

Where The Exclusions Are Creeping<\/h2>\n

The real trouble starts outside cyber policies. Management liability, directors and officers (D&O), errors and omissions (E&O), employment practices, fiduciary, and crime coverage are all beginning to include sweeping AI exclusions.<\/p>\n

Some of the language is alarmingly broad. A few carriers have introduced \u201cabsolute\u201d exclusions that eliminate coverage for \u201cany actual or alleged use, deployment, or development of Artificial Intelligence.\u201d That\u2019s not a scalpel; it\u2019s a sledgehammer.<\/p>\n

Consider the implications:<\/p>\n

\u2013 A discrimination case involving an AI r\u00e9sum\u00e9 screening tool? Excluded.
\u2013 A negligence claim tied to an AI-driven contract review platform? Excluded.
\u2013 A fiduciary duty allegation that a board failed to oversee AI risks? Also excluded.<\/p>\n

Even routine disputes could devolve into arguments about whether AI played a role. The net effect is to shift risk back onto firms and their clients \u2014 often without their awareness.<\/p>\n

Why Lawyers Should Pay Attention<\/h2>\n

Lawyers need to look at this from two angles. First, as business leaders, your own firm\u2019s policies may already contain AI exclusions you haven\u2019t noticed. Second, as advisors, clients will expect you to spot these risks in their coverage. Missing them is an easy way to damage both trust and credibility.<\/p>\n

We\u2019ve seen this movie before. \u201cSilent cyber\u201d risk crept into property and liability policies, sparking disputes about whether losses were covered. Over time, insurers responded with exclusions and clarifications. AI appears to be on the same path \u2014 only the exclusions are emerging faster and with less precision.<\/p>\n

What To Do About It<\/h2>\n

Here\u2019s how firms and their clients can stay ahead:<\/p>\n

\u2013 Review policies carefully. Don\u2019t assume your existing D&O or E&O coverage includes AI-related events. Look for exclusionary language, especially vague or undefined terms.
\u2013 Push for clarity. If an exclusion exists, negotiate definitions. What exactly counts as AI? A predictive text feature? A chatbot? The less defined the term, the more room for denial.
\u2013 Explore affirmative options. Some insurers are beginning to offer endorsements or new products to cover AI-related risks. If your firm or clients rely heavily on AI tools, these are worth investigating.
\u2013 Collaborate with brokers and risk managers. They\u2019re often the first to spot emerging exclusions and can help secure coverage that matches your operations.<\/p>\n

Remain Calm and Vigilant<\/h2>\n

The good news is that cyber insurance remains a reliable option. The bad news is that exclusions are creeping across other policies \u2014 and they\u2019re being drafted broadly enough to cause serious problems down the road.<\/p>\n

So no, you don\u2019t need to panic. But you do need to pay attention. These exclusions aren\u2019t hypothetical; they\u2019re already appearing. Unless you\u2019re proactive, you may discover that the very AI tools making your firm more efficient are also the reason your insurance claim gets denied.<\/p>\n

Bottom line: review your coverage this quarter for your firm, and before AI exclusions creep any further.<\/p>\n

\n

Michael C. Maschke is the President and Chief Executive Officer of Sensei Enterprises, Inc. Mr. Maschke is an EnCase Certified Examiner (EnCE), a Certified Computer Examiner (CCE #744), an AccessData Certified Examiner (ACE), a Certified Ethical Hacker (CEH), and a Certified Information Systems Security Professional (CISSP). He is a frequent speaker on IT, cybersecurity, and digital forensics, and he has co-authored 14 books published by the American Bar Association. He can be reached at\u00a0mmaschke@senseient.com.<\/strong><\/em><\/p>\n

Sharon D. Nelson is the co-founder of and consultant to Sensei Enterprises, Inc. She is a past president of the Virginia State Bar, the Fairfax Bar Association, and the Fairfax Law Foundation. She is a co-author of 18 books published by the ABA. She can be reached at\u00a0snelson@senseient.com<\/strong><\/em>.<\/p>\n

John W. Simek is the co-founder of and consultant to Sensei Enterprises, Inc. He holds multiple technical certifications and is a nationally known digital forensics expert. He is a co-author of 18 books published by the American Bar Association. He can be reached at\u00a0jsimek@senseient.com<\/strong><\/em>.<\/p>\n

The post AI Exclusions Are Creeping Into Insurance \u2014 But Cyber Policies Aren\u2019t The Issue (Yet)<\/a> appeared first on Above the Law<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Ed. note: This is the latest in the article series,\u00a0Cybersecurity: Tips From the Trenches,\u00a0by our friends at\u00a0Sensei Enterprises, a boutique provider of IT, cybersecurity, and digital forensics services. Artificial intelligence (AI) is everywhere \u2014 in legal research tools, in \u201csmart\u201d assistants that draft contracts, and, if we\u2019re honest, probably in that partner\u2019s suspiciously polished brief. […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[16],"tags":[],"class_list":["post-132420","post","type-post","status-publish","format-standard","hentry","category-above_the_law"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/posts\/132420","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/comments?post=132420"}],"version-history":[{"count":0,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/posts\/132420\/revisions"}],"wp:attachment":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/media?parent=132420"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/categories?post=132420"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/tags?post=132420"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}