/>iRisk professionals and insurers alike continue to monitor the rapid evolution and deployment of artificial intelligence (AI). With increased understanding comes increased efforts to manage and limit exposure. Exclusions to coverage offer insurers potentially broad protection against evolving AI risk. Most recently, one insurer, Berkley, has introduced the first so-called “Absolute” AI exclusion in several specialty lines of liability coverage, signaling an even broader effort to compartmentalize AI risk.
The good news for policyholders is that AI exclusions have led to introduction of new AI-specific coverages to fill potential gaps. As discussed in a recent blog post, start-up insurer Armilla, in partnership with Lloyd’s, introduced an affirmative AI insurance product that offers dedicated protections for certain AI exposures. Other insurers, like Munich Re, have likewise introduced focused AI insurance products. Dedicated AI coverages may soon become the norm, especially if other insurers follow Berkley’s lead to broadly exclude AI risk from existing or “legacy” lines of coverage.
Berkley’s “Absolute” AI Exclusion
Berkley’s new exclusion, intended for use in the company’s D&O, E&O, and Fiduciary Liability insurance products, purports to broadly exclude coverage for “any actual or alleged use, deployment, or development of Artificial Intelligence.” The full endorsement states:
The Insurer shall not be liable to make payment under this Coverage Part for Loss on account of any Claim made against any Insured based upon, arising out of, or attributable to:
(1) any actual or alleged use, deployment, or development of Artificial Intelligence by any person or entity, including but not limited to:
(a) the generation, creation, or dissemination of any content or communications using Artificial Intelligence;
(b) any Insured’s actual or alleged failure to identify or detect content or communications created through a third party’s use of Artificial Intelligence;
(c) any Insured’s inadequate or deficient policies, practices, procedures, or training relating to Artificial Intelligence or failure to develop or implement any such policies, practices, procedures, or training;
(d) any Insured’s actual or alleged breach of any duty or legal obligation with respect to the creation, use, development, deployment, detection, identification, or containment of Artificial Intelligence;
(e) any product or service sold, distributed, performed, or utilized by an Insured incorporating Artificial Intelligence; or
(f) any alleged representations, warranties, promises, or agreements actually or allegedly made by a chatbot or virtual customer service agent;
(2) any Insured’s actual or alleged statements, disclosures, or representations concerning or relating to Artificial Intelligence, including but not limited to:
(a) the use, deployment, development, or integration of Artificial Intelligence in the Company’s business or operations;
(b) any assessment or evaluation of threats, risks, or vulnerabilities to the Company’s business or operations arising from Artificial Intelligence, whether from customers, suppliers, competitors, regulators, or any other source; or
(c) the Company’s current or anticipated business plans, capabilities, or opportunities involving Artificial Intelligence;
(3) any actual or alleged violation of any federal, state, provincial, local, foreign, or international law, statute, regulations, or rule regulating the use or development of Artificial Intelligence or disclosures relating to Artificial Intelligence; or
(4) any demand, request, or order by any person or entity or any statutory or regulatory requirement that the Company investigate, study, assess, monitor, address, contain, or respond to the risks, effects, or impacts of Artificial Intelligence.
The potential breadth of this exclusion cannot be overstated. And, the exclusion’s title suggests that Berkley intends to apply the exclusion to virtually any claim with a connection to AI.
Given the current landscape of AI-related liabilities giving rise to insurance claims, likely first-deployment might be in the context of shareholder litigation alleging AI-related misrepresentations. Those securities claims, which have come to be known as “AI Washing” lawsuits, may be targeted for “actual or alleged statements, disclosures, or representations concerning or relating to Artificial Intelligence.” While the target wrongful acts (“statements, disclosures, or representations”) seem straight-forward, one over arching question remains: what exactly constitutes “Artificial Intelligence?”
What is “Artificial Intelligence”: A Definitional Dilemma
The exclusion applies to claims concerning or relating to “Artificial Intelligence.” But what exactly does that include (or not include)? On its face, one might argue that the exclusion does indeed afford “absolute” protection against AI-related risk. An insurer in practice may seek to simplify the analysis to simply—does the claim reference AI? If so, no coverage.
But as with most insurance language, the devil is in the details, and the exclusion’s purported reach is far less certain. Much of the exclusion’s effect lies in its definition of “Artificial Intelligence.” That definition, read closely, is subject to a myriad of interpretations and perhaps incapable of comprehension for all but the most sophisticated AI engineers. The supplied definition states:
“Artificial Intelligence” means any machine-based system that, for explicit or implicit objectives, infers, from the input it receives, how to generate outputs such as predictions, content, recommendations, or decisions that can influence physical or virtual environments, including, without limitation, any system that can emulate the structure and characteristics of input data in order to generate derived synthetic content, including images, videos, audio, text, and other digital content.
Insurance policies are sold by insurance brokers; they’re bought by risk managers; claims are handled by claim handlers and disputes are typically decided by judges. Nowhere in that list of professionals do we find AI engineers, computer programmers, mathematicians, or other technical professional capable of understanding what actually occurs within the “black box” of a particular AI system. That lack of front-line understanding will invariably lead to differing interpretations and coverage disputes.
Takeaways
Berkley’s introduction of a so-called “Absolute” AI exclusion marks an important development in how the insurance industry is navigating the complexities associated with AI. However, the purported breadth of the exclusion highlights the imprecision that stands to frustrate the insurance industry’s ability to manage AI-related risks.
For now, policyholders must remain vigilant about the addition of any AI-related provisions into their existing, new, or renewing policies. Policyholders likewise should be on the lookout for questions in insurance applications concerning how the company may be using AI. Answers to these questions, like all other application questions, must be carefully considered, especially given the rapid evolution and deployment of AI, which stands to make even the most diligent responses obsolete before the next policy renewal.
