Over the past year, business media covering insurance and law have described preparations by insurers to insert new generative AI exclusions into business policies. Thousands of words have been devoted to the subject so far.
But such exclusions have not been built into designer and contractor policies and are not expected to be soon, according to insurers and brokers of designer and contractor professional liability policies.
“We’re constantly evaluating the landscape and we don’t want to have a blanket policy, so the short answer is we’re not enforcing AI exclusions,” he says. Michelle Chia, underwriter of AXA XL vAmericas subscription director for cyber, design and select professions.
Several insurers, including AXA XL, offer protection with separate cyber policies for some AI misuses. And while some insurers declined to comment for this article, there is no indication that they have used a generative AI exclusion for design professionals or contractors performing design work.
What is clear is that insurers are convinced that generative artificial intelligence, now incorporated into different aspects of design and construction works, could lead to new and as yet unquantifiable exposures.
A milestone was passed in January when the Insurance Services Bureau, which creates model language for policies, issued an AI exclusion.
In an alert posted on his website earlier this year, broker Arthur J. Gallagher wrote that the exclusion “is beginning to appear in commercial general liability (CGL) policies” and “eliminates coverage” for generative AI used in “tools that are increasingly incorporated into routine construction activities.”
“This endorsement can create coverage gaps that aren’t immediately apparent,” Gallagher noted. “These gaps can affect claims outcomes, contractual compliance, bid responsiveness, and prequalification with property owners and public entities” for injury or property damage.
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Still other sources warned that dDedicated AI covers may soon become the norm, with ‘silent’ AI cover replaced by new specific insurance products and endorsements with separate rates and payment limits.
An example cited was an absolute exclusion of AI for policies issued to cover errors and omissions of directors and officers of one of many Berkley Insurance Co. Subsidiaries and Operating Units
But this isolated Berkley policy has not been used in any policy affecting design and construction.
Like broker Gallagher, the Shumaker Law Firm is seeing a big change. An article on the website estimates that silent AI coverage, which can cover an AI-related data breach under a separate cyber policy or a claim related to the misuse of AI-generated content under a technology errors and omissions policy, will gradually become a thing of the past.
The reason? “AI can turn ordinary risks into bigger, faster, harder-to-measure risks,” Shumaker wrote.
Meanwhile, common sense should be applied when using generative AI, says AXA XL’s Chia.
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Designers and contractors must train staff for proper use of AI that complies with all company rules or laws. Generative AI should be used for the right tasks, Chia says, just as “you wouldn’t use a Toyota Camry to plow snow.”
But when it comes to professional indemnity insurance, says Chia, “our policy forms for architects and engineers are agnostic about how the matter occurs.”
