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AI insurance
AI contract clauses are terms clients add to control how a supplier uses AI: disclosure, data use, output quality, IP indemnities and liability. They matter because an indemnity or warranty can promise more than your insurance covers, and the difference is yours to pay.
Part of: AI insurance UK
In short
Clients increasingly ask suppliers to disclose AI use, not train AI on client data, warrant AI outputs, give IP indemnities and accept higher or uncapped liability. Insurance usually covers liability you would have at law, not extra liability you accept by contract, so wide indemnities and warranties can fall outside cover. Under the Unfair Contract Terms Act 1977, whether a liability cap is reasonable can depend partly on the insurance available to you. Negotiate caps that match your limit of indemnity, limit indemnities to third-party claims caused by your fault, and tell your insurer about unusual terms before you sign.
Public buyers have helped set the pattern. The UK government's PPN 017 (February 2025) suggests asking suppliers to disclose AI used in tenders and in delivering services, and to put controls in place so suppliers do not use confidential contracting authority information to train AI. In the EU, public buyers can use the model contractual clauses for AI procurement, updated on 5 March 2025, with a full version for high-risk AI aligned with the EU AI Act. Private clients now borrow from both.
| Clause | What it typically says | Insurance point |
|---|---|---|
| AI use disclosure | Declare where AI is used and get approval for new uses | A breach is a contract breach; the losses that follow may fall under PI if they flow from your professional error |
| No training on client data | Client data and outputs must not be used to train or improve any model | Data misuse claims may fall under cyber or PI; deliberate breach is usually excluded |
| Output warranty | AI outputs will be accurate, reviewed by a person or fit for purpose | Absolute warranties go beyond reasonable care and are commonly excluded |
| IP indemnity | You defend and indemnify the client against third-party IP claims over deliverables, including AI output | IP infringement cover may respond to the underlying claim; the indemnity itself may be wider than the cover |
| Compliance with AI law | You comply with all AI laws, often naming the EU AI Act | Fines and the cost of compliance are usually not insured |
| Uncapped or high liability | No cap for data, IP or confidentiality breaches | Your policy limit is fixed; anything above it is uninsured |
Professional indemnity is written to cover your legal liability for breach of professional duty. Many wordings contain a contractual liability exclusion, which commonly removes cover for liability you take on under a contract, such as an indemnity, guarantee, warranty or penalty, beyond what you would have owed anyway. The wording varies, so read yours. See how PI treats contractual liability and hold harmless and indemnity agreements.
Three gaps come up most with AI:
Between businesses, exclusion and limitation clauses are tested under the Unfair Contract Terms Act 1977:
So insurance is part of the legal test. A cap set at a sensible multiple of fees, with your insurance limit in mind, is easier to defend than a nominal one. Drafting matters too. In Drax Energy Solutions Ltd v Wipro Ltd [2023] EWHC 1342 (TCC), an IT services contract capped liability at 150% of the charges paid or payable in the preceding twelve months. The customer's claims totalled about £31m; the High Court held the clause was a single aggregate cap, of about £11.5m, not a separate cap for each claim. If you mean a per-claim cap, or one aligned to your PI basis, say so expressly. See PI and terms of business liability caps.
Most AI work relies on someone else's model or platform. Vendor terms commonly cap liability at fees paid, say outputs must be checked, and attach conditions to any IP indemnity. Regulators place responsibility on the business using the tool: the CMA's March 2026 guidance on AI agents says a business is responsible for what an AI agent does "in the same way you are responsible for what an employee does", even where a third party supplied it. A wide client indemnity paired with a narrow vendor indemnity leaves you in the middle. See AI agent insurance and AI IP infringement insurance.
Under section 3 of the Insurance Act 2015 you must make a fair presentation of the risk before cover starts and at renewal. For AI contracts, insurers commonly want to know:
If a client asks for terms outside your normal position, ask your broker before signing; some insurers can confirm how a clause will be treated. See insurance requirements in technology contracts, when a contract requires a higher PI limit and the duty of fair presentation.
Apex has an AI insurance scheme with an insurer that names your specific AI work in the policy as insured activity, so the services your contracts describe can match what the policy covers. You choose from professional indemnity, cyber, product and public liability, and IP infringement cover, and cover for US exposure is available, subject to the insurer's underwriting and the policy terms. To quote, we need a precise description of your AI work, your address, your turnover (including how much comes from the USA and Canada) and the limit of indemnity you want; you can start an AI insurance quote online in a few minutes. See AI insurance UK and US cover for UK AI firms.
Not without checking it against your insurance. Limit it to third-party claims caused by your breach or negligence, cap it, and exclude client data, prompts and fines. An indemnity for all losses arising from AI use can go beyond what PI covers, and the gap would be paid by your business.
Usually just to the extent you would have been liable anyway. Many PI policies exclude liability assumed under contract, such as indemnities, guarantees and warranties, beyond your liability at law. Some wordings give limited cover for specific indemnities. Check the wording and ask your broker before you sign anything unusual.
Yes, if you can deliver it. Check your AI providers' terms and settings before agreeing, because your promise depends on theirs. UK government guidance (PPN 017) encourages public buyers to stop suppliers using confidential information for training, and under UK GDPR a processor must act on the controller's documented instructions.
Generally, a cap at or below your limit of indemnity is the safer position, because anything above the limit is uninsured. Remember that limits are often shared across all claims in a year. Under section 11(4) of the Unfair Contract Terms Act 1977, available insurance is relevant to whether a cap is reasonable.
Usually yes, if they are material. The Insurance Act 2015 requires a fair presentation of the risk, and uncapped liability, IP indemnities and output warranties can affect how an insurer views it. Tell your broker before you sign, so you know how the policy is likely to treat the clause.
Tell us what your AI work is, where you are based, your turnover and the limit you need. It takes a few minutes online, and a broker will come back to you with options. Or call 0117 325 0027.
Start an AI insurance quote Request a callbackApex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales, company number 07014570. This page is general information, not advice on your individual circumstances, and it does not guarantee that cover will be available or on what terms.
