2026-10-06 · Source: Insurance Business US
Summary in 3 Points • California's SB 947 mandates human corroboration for automated employment decisions, impacting liability for employers using AI tools. • EPLI underwriters are increasingly inquiring about AI usage and vendor contracts, highlighting potential gaps in coverage. • Berkley Insurance has introduced an AI exclusion in its management liability policies, reflecting a growing trend in the insurance market. --- California's new legislation, SB 947, requires employers to have human oversight for automated employment decisions starting July 1, 2027. This shift places pressure on brokers and insurers to clarify liability when third-party AI tools are used, especially as litigation over AI-assisted recruitment is on the rise. The implications for Employment Practices Liability Insurance (EPLI) are significant, as underwriters begin to scrutinise AI usage and vendor contracts more closely, particularly for smaller firms that may lack legal resources. Brokers are advised to assess clients' outsourcing arrangements to identify potential liability gaps. The introduction of AI exclusions in management liability policies, such as those by Berkley Insurance, signals a market shift towards addressing AI-related risks. As the landscape evolves, the potential for widespread claims across multiple insureds using the same AI vendor raises concerns about aggregation risk, similar to trends seen in cyber insurance. The introduction of California's SB 947 could lead to increased scrutiny of AI vendor contracts in EPLI placements, impacting coverage and liability for brokers and underwriters.
The introduction of California's SB 947 could lead to increased scrutiny of AI vendor contracts in EPLI placements, impacting coverage and liability for brokers and underwriters.