Businesses using generative AI should take note of new changes coming in 2026: the Insurance Services Office (ISO) has introduced two new optional endorsements—CG 40 47 and CG 40 48—that create generative AI insurance exclusions under commercial general liability (CGL) policies. These exclusions allow insurers to deny coverage for claims tied to generative AI outputs, signaling a major shift in how liability policies treat emerging AI-related risks.
CG 40 47 provides a broad exclusion under Coverages A (bodily injury and property damage) and B (personal and advertising injury), barring coverage for harms linked to generative AI outputs, such as defamatory content, IP infringement from AI-generated material, or even physical damages if traceable to AI-driven errors. CG 40 48 is narrower, excluding only Coverage B (personal and advertising injury), preserving potential coverage under bodily injury or property damage in limited scenarios.
The introduction of these new endorsements ends the “silent coverage” era, where traditional CGL policies implicitly covered AI risks absent explicit exclusions. With ISO forms underpinning about 82% of U.S. Property & Casualty policies, rapid adoption is expected. Many carriers likely will attach these endorsements at renewals, reducing unintended exposure amid rising GenAI-related lawsuits (e.g., bias, hallucinations, copyright claims from training data).
For businesses, the impact could be significant. Companies heavily reliant on generative AI—for marketing, product design, customer service, or internal tools—face potential coverage gaps in standard liability policies. This could lead to uncovered claims for third-party harms, increasing out-of-pocket costs, litigation risks, and reputational damage. Small to mid-sized firms, often without specialized coverage, may be hit hardest.
To mitigate the risks posed by generative AI insurance exclusions, businesses should work closely with their insurance brokers to review existing policies for these new endorsements. Where appropriate, companies may need to seek affirmative AI coverage through tech Errors & Omissions policies, cyber liability insurance, or emerging standalone AI products. Strengthening internal risk management practices—such as implementing AI governance frameworks, conducting bias testing, and making transparent disclosures—can also help reduce exposure. Ultimately, these exclusions highlight the insurance industry’s growing reluctance to cover AI-related risks, pushing the market toward more specialized and potentially more expensive solutions.
Disclaimer: This article is provided for informational purposes only and does not constitute legal advice. Polales Horton & Leonardi LLP is experienced in handling complex insurance coverage matters on behalf of policyholders across the United States.
