Six months ago, a two-page endorsement slipped into the renewal packet of roughly 82% of commercial general liability policies in the United States. Most policyholders never read it. Anyone who builds houses for a living should have.
Its catalog number is ISO CG 40 47 01 26, titled "Generative Artificial Intelligence Exclusion." In plain language: if a loss can be traced, directly or indirectly, to generative AI, the insurer can deny the claim. Bodily injury. Property damage. Personal and advertising injury. All of it.
It took effect January 1, 2026. ISO, which writes the template forms that underpin the vast majority of American property and casualty insurance, released it alongside a companion form, CG 40 48. Together, they give carriers a standardized, ready-to-adopt mechanism for walking away from any claim where AI was involved.
What the Endorsement Actually Says
The definition is broad enough to make an insurance defense attorney smile. "Generative artificial intelligence" means "a machine-based learning system or model that is trained on data with the ability to create content or responses, including but not limited to text, images, audio, video, or code."
That covers ChatGPT drafting a scope of work. It covers an AI-assisted estimating tool generating a quantity takeoff. It covers a design platform that auto-routes plumbing layouts. It covers the scheduling software that optimized your project timeline using machine learning. If the tool was trained on data and creates content, it qualifies.
Worse: the exclusion can apply even when AI is only one contributing factor to a loss. A Gallagher advisory published in May 2026 warned that "the presence of generative AI anywhere in the causal chain may be sufficient to challenge coverage." The builder reviewed the output. Your architect approved it. Your inspector signed off. None of that matters if the insurer can point to an AI tool upstream.
How Residential Builders Are Already Exposed
A ServiceTitan survey of 1,000 residential contractors, released in April 2026, found that 74% view AI as an efficiency engine. Only 25% are actively using it. Among those who are, 48% report increased productivity and 45% report time savings. Those tools are working. But does the insurance still work alongside them?
Consider what a typical mid-size residential builder might already be using: AI-assisted cost estimation for bids. AI-generated scheduling with weather and labor prediction. An AI tool for energy modeling or load calculations. Generative design software that proposes structural layouts. A chatbot that drafts client communications, change orders, or specifications.
Every one of those use cases falls within the CG 40 47 definition. Every one creates a potential path for an insurer to deny a claim.
The Scenario Nobody's Talking About
A general contractor uses an AI estimating tool to size structural headers for a second-story addition. It pulls from regional span tables and generates a recommendation. He reviews it, it looks reasonable, and proceeds. Eighteen months later, the homeowner notices deflection in the floor above. An engineer determines the headers were undersized by one grade. Repair costs: $45,000.
Under a pre-2026 CGL policy, this is a textbook covered claim. Construction defect. Property damage. Insurance pays.
Under a policy with CG 40 47 attached? An insurer's first question is how the headers were sized. Once AI enters the answer, the exclusion activates. It does not matter that the builder exercised judgment. It does not matter that the error might have happened without AI. Endorsement language says "arising out of, or attributable to" — not "caused exclusively by."
The homeowner is left with a $45,000 structural defect and a builder whose insurance won't pay for it. Now that builder carries an uninsured liability that could end a small company.
The Contract Gap Is Just as Bad
The AIA A201-2017, the most widely used construction contract in the country, contains no provisions for AI use, liability allocation, or disclosure requirements. Frantz Ward, a national construction law firm, has identified five specific gaps: the standard of care definition doesn't contemplate AI-assisted work, design document responsibility doesn't address AI-generated content, intellectual property clauses don't cover AI outputs, third-party technology risk has no allocation mechanism, and insurance requirements don't align with the new exclusion landscape.
That last one is the killer. Most owner-contractor agreements require the builder to carry CGL insurance meeting certain specifications. Those specifications were written when a CGL policy covered essentially all construction-related bodily injury and property damage. Nobody contemplated that an endorsement would carve out an entire category of tools that the same contract implicitly expects the builder to use for competitive pricing.
In practice: a builder can be in full compliance with their contractual insurance requirements while carrying a policy that doesn't actually cover the work they're doing.
Carriers Are Moving Fast
ISO provides the template. Individual carriers decide whether to attach it. Early adopters are not waiting.
Berkley Insurance has introduced what the market calls an "absolute" AI exclusion across its directors and officers, errors and omissions, and fiduciary liability products. Berkley's endorsement specifically names ChatGPT, Bard, Midjourney, and DALL-E. Hamilton Insurance Group released its own generative AI exclusion. Philadelphia Insurance and Hamilton Select have excluded AI-related claims from errors and omissions coverage entirely.
AIG, Great American, and W.R. Berkley have filed for regulatory approval to introduce comparable exclusions, according to industry trade publications. Risk Specialty Group, a Houston-based firm specializing in design professional insurance, reports that adoption is accelerating with each renewal cycle.
Stanford Law School research has documented AI hallucination rates between 58% and 88% on general-purpose tools, and 20% to 33% on specialized systems. For an insurer trying to quantify the risk of covering AI-assisted construction work, those numbers make the math simple: exclude it.
What You Can Actually Do
For builders: pull your current policy. Look for CG 40 47 or CG 40 48 in the endorsement schedule. If it's there, you need to understand exactly what it excludes before your next project kicks off. If it's not there, it may appear at renewal.
Risk Specialty Group recommends a four-step audit. Check the declarations page for the endorsement schedule. Search the policy body for any reference to "artificial." Review the definitions section for narrowed language around "professional services." Confirm the retroactive date still covers past AI-assisted work under your claims-made coverage.
Carriers have shown willingness to negotiate carve-backs for supervised AI use, particularly when a builder can document an AI governance program: which tools are approved, what verification steps are required, how human review is documented. Gallagher's advisory suggests exploring "endorsements, manuscript carve-backs, or complementary coverages." The key word is "documented." An informal policy of checking AI output is not the same as a written protocol with audit trails.
For homeowners: ask your builder whether they use AI tools. Ask them whether their CGL policy excludes AI-related claims. If they don't know the answer to either question, that tells you something. You may want to require that the builder's certificate of insurance specifically confirms no AI exclusion is attached, or that AI-related losses are carved back into coverage.
For both: read the contract. If it requires CGL coverage but doesn't address AI exclusions, the contract has a gap that neither party's lawyer caught. Somebody should fix that before construction starts, not after the floor deflects.
Sources: ISO/Verisk CG 40 47 01 26 and CG 40 48 endorsement forms (effective January 1, 2026); Gallagher risk advisory, "ISO Introduces Generative AI Exclusion in Commercial General Liability Policies" (May 2026); Cohen Seglias Pallas Greenhall & Furman PC, "New Generative AI Insurance Exclusion: What the Construction Industry Needs to Know" (April 2026); Risk Specialty Group, "E&O Coverage and AI Design Work" (May 2026); ServiceTitan 2026 Residential State of the Trades Report (n=1,000, April 2026); Warranty Week, "New Home Builder Warranty Report" (April 2025, covering 2024 data); Frantz Ward LLP, analysis of AIA A201-2017 AI gaps; HCR Law, "Artificial Intelligence and Construction Contracts" (May 2026).