Your D&O Policy Was Never Silent on AI. It Just Hadn’t Said No Yet.
Most companies assume their existing D&O, E&O, EPLI, and cyber policies simply carry over to whatever new technology the business adopts. For years, that assumption was mostly safe, because AI use was not addressed one way or the other in most policy language. Coverage was silent, not excluded.
That silence is disappearing fast. Insurers are now writing explicit AI exclusions into commercial general liability, D&O, E&O, EPLI, , cyber, and crime policies, including standardized forms like ISO’s CG 40 47 01 26 and carrier-specific language such as Berkley Insurance’s broadly worded “Absolute” AI exclusion. Where a policy used to say nothing about AI, many now say no.
For a California employer, this gap lands somewhere specific. Under California’s Fair Employment and Housing Act, FEHA (Gov. Code § 12940), an employer that uses an automated decision system in hiring, discipline, or termination is directly subject to regulations governing that use. If an employee or applicant later challenges a decision the AI tool influenced, the resulting claim runs straight through employment practices, exactly the coverage a company assumes its D&O, E&O, or EPLI policy provides. A newly added AI exclusion can cut that assumption off before defense costs are ever paid.
The practical response is not to stop using AI tools. It is to stop assuming the insurance question answers itself. Before the next renewal, an employer should know which decisions in the hiring and discipline pipeline touch an automated system, and whether the current policy language still covers a claim that traces back to one of them.
Whether a specific policy actually excludes a specific claim depends on the exact exclusion language and the specific decision being challenged, and that is not something a business owner should have to guess at when a claim is already on the table.
If an employment decision your AI tool touched ever becomes a claim, the exclusion in your current policy may already have decided whether that claim is covered. If that sounds like where things stand, a short conversation is the fastest way to know what you are actually facing.
Contact Michael Trust Law, APC for a no-charge initial consultation. The facts determine what needs to be addressed, and how much of a conversation that takes.
This post shares general information based on common patterns I see in California workplaces. It is not legal advice, does not create an attorney-client relationship, and outcomes depend on specific facts, no lawyer can guarantee a result. Past results do not guarantee or predict future outcomes. AI may have been used to create this post. All content reviewed by a CA attorney before publication.