AI Insurance Exclusions in 2026: What Every Small Business Needs to Know

If your business uses ChatGPT, Microsoft Copilot, or any AI tool, there is a good chance your general liability insurance no longer covers claims arising from that usage. Starting in January 2026, major carriers began attaching AI exclusion endorsements to commercial policies — and most policyholders have no idea.

What Is Happening

The insurance industry standards organization Verisk (formerly ISO) filed a series of endorsement forms in late 2025 that give carriers a standardized way to exclude AI-related liability from existing commercial policies. These are not theoretical. They are real forms, with real filing numbers, that carriers are attaching to policies right now.

The three key endorsements are:

• CG 40 47 — AI Technology Exclusion for Commercial General Liability. This is the broadest form. It excludes bodily injury, property damage, and personal/advertising injury arising out of AI technology.
• CG 40 48 — AI Technology Limitation. A narrower version that limits rather than fully excludes AI coverage, giving carriers flexibility to offer partial coverage.
• CG 35 08 — AI Technology Exclusion for Commercial Umbrella. Extends the AI exclusion to umbrella policies, closing the gap that would otherwise exist if only the underlying GL policy had the exclusion.

These forms went effective in January 2026. Carriers including AIG, WR Berkley, Great American, and Hamilton have begun implementing them. More are expected to follow throughout the year, particularly as renewal cycles progress.

Why This Matters for Small Businesses

The AI insurance exclusion 2026 wave is not just a concern for tech companies. Consider these scenarios that affect everyday small businesses:

• A marketing agency uses AI to generate ad copy for a client. The copy contains a factual error about a competitor, leading to a defamation claim. Under CG 40 47, the agency's GL policy would not cover this claim because it arose from AI technology.
• A consulting firm uses Copilot to draft a financial model for a client. The model contains an error that leads to a bad investment decision. The resulting professional liability claim could be excluded if the carrier has added AI limitation endorsements.
• A healthcare practice uses an AI chatbot for patient intake. The chatbot provides incorrect medical guidance. The malpractice claim has an AI component that the insurer could use to deny coverage.

The common thread: any claim where AI was part of the chain of events is now at risk of being excluded. And with over 75% of small businesses now using at least one AI tool according to industry surveys, the exposure is massive.

The AI Liability Insurance Gap Is Real

Here is the uncomfortable truth: most small businesses have an AI liability insurance gap and do not know it. This gap exists because of three converging factors:

1. AI adoption outpaced insurance products. Businesses started using ChatGPT and similar tools in 2023-2024, but insurance products did not adjust until 2025-2026. During that gap, carriers were exposed to undefined risk — and now they are correcting course aggressively.
2. Endorsements are added silently. Most carriers do not send a separate notification when adding an endorsement. It appears in your renewal documents, often buried in a stack of forms. Unless you or your broker read every page, you will miss it.
3. There is no standalone "AI insurance" product for small businesses yet. While some specialty insurers are developing AI liability products, they are generally targeted at technology companies building AI systems — not the small business using off-the-shelf AI tools.

What You Can Do Right Now

The situation is serious, but you are not powerless. Here are concrete steps every small business should take:

1. Check Your Current Policy for AI Endorsements

Pull up your current GL, BOP, or umbrella policy and search for any reference to "artificial intelligence," "AI technology," "CG 40 47," "CG 40 48," or "CG 35 08." If you find any of these forms attached, your policy has been modified. You can use our free gap check tool to understand your risk level in 60 seconds.

2. Document Your AI Governance

Carriers that offer the CG 40 48 limitation (rather than the full CG 40 47 exclusion) are looking for evidence that businesses have responsible AI practices. AI governance documentation for small businesses does not need to be complex. At minimum, you should document:

• Which AI tools your business uses and for what purposes
• Who is authorized to use AI tools and in what contexts
• What review processes exist before AI-generated content goes to clients or the public
• How you handle data privacy when using AI tools
• Your incident response plan if an AI-related error occurs

3. Talk to Your Insurance Broker

Armed with your governance documentation, have an explicit conversation with your broker about AI coverage. Ask specifically: does my current policy have any AI-related endorsements? If not, are they likely to be added at renewal? What options exist for maintaining coverage?

4. Get the AI Governance Kit

We built the CoverMyAI Governance Kit ($29) specifically for this moment. It includes templates for AI usage policies, risk assessment frameworks, and documentation that demonstrates responsible AI governance to your insurer. It takes about 15 minutes to complete and gives you the paper trail that could be the difference between a covered claim and a denied one.

The Bottom Line

The AI insurance exclusion wave of 2026 is not coming — it is already here. Every business that uses AI tools needs to understand their exposure and take proactive steps to maintain coverage. The good news is that carriers are not trying to eliminate AI coverage entirely. They are trying to manage undefined risk. Businesses that can demonstrate responsible AI governance are in a much stronger position to negotiate favorable terms and avoid the broadest exclusions.

Do not wait until your next claim is denied. Check your coverage today.