Artificial intelligence isn’t just a headache for human resources. More and more, corporate legal teams are becoming entangled in the technology’s mistakes.
Generative AI-related lawsuits in the United States grew 978% from 2021 to 2025, according to a report from the reinsurance broker Gallagher Re. But a growing number of insurance companies are removing AI liability coverage. Berkshire Hathaway, Chubb, and Travelers have all won approval to largely drop the protection in recent months.
Technically, the companies have added “AI exclusion clauses” to their standard commercial liability policies. Those clauses cover a wide range of issues, including employees alleging AI-driven discrimination, intellectual property violations (such as AI using copyrighted material without a company’s knowledge), and property damage caused by autonomous or robotic systems.
It’s a move that could leave many companies exposed to steep financial damages. It could also slow the corporate rollout of AI, as executives weigh whether the potential risks outweigh the technology’s rewards.
“This is highlighting a crucial blind spot for businesses,” says Ifeoma Yvonne Ajunwa, a professor at Emory University’s School of Law. “They are clamoring to join the AI bandwagon, but they have to pause and ask if they’re fully protected.”
Changes aren’t universal
While Berkshire Hathaway, Chubb, and Travelers are major names in insurance, not every insurer is following their lead. HSB , in March, began offering AI liability insurance for small businesses.
“All types of businesses are using AI to do things more quickly and efficiently,” said Timothy Zeilman, global head of product ownership for HSB, in a statement. “At the same time, the AI transformation brings new legal and financial exposures. Business owners may wonder, am I protected? AI insurance helps remove that uncertainty.”
There are also a number of smaller insurers, some relatively new themselves, focused specifically on this area. Some have the support of established names, including Armilla AI (which counts Chaucer Group and Axis Capital among its backers). Others do not. That could further complicate matters if business owners don’t do their homework.
“It is very much the wild west. It highlights the need for precaution,” says Ajunwa. “The main thing is to evaluate the company that’s offering this insurance. What is their capitalization? If they’re selling $10 million or $20 million in insurance, how much money does that company actually have? If the insurance is used, will you actually be reasonably confident of a payout?”
Not without precedent
While the moves by insurance companies are frustrating for founders and corporate boards, they shouldn’t come as a complete surprise. In the early 1990s, many insurers carved out exceptions for online activities as the internet became a standard part of daily life. That led to the rise of “cyber insurance.” Initially aimed at IT companies, those policies focused on issues like errors in data processing and online media risks before evolving into a broader specialty category.
Another way to view the issue is by looking at the healthcare marketplace. Health insurers often decline to cover a new medical procedure, device, or drug until they are confident it will not cause more harm than good. Coverage typically comes only after a treatment has been thoroughly tested and established a reliable track record.
AI, as you might imagine, does not yet have an enviable track record. And because only a relatively small number of companies provide AI services to corporate clients, a critical flaw in a widely adopted AI model could result in hundreds, or even thousands, of claims.
That could keep major insurers on the sidelines for a while.
