Direct answer
Sanctioned AI is officially approved, documented, and governed by the organization's AI policy. Shadow AI bypasses all governance controls, creating unmanaged regulatory and insurance risk because AI exclusion endorsements apply to all AI use regardless of authorization.
Carrier Endorsement Details
Excludes bodily injury, property damage, and personal/advertising injury arising out of generative AI under Coverage A and Coverage B. Part of the January 2026 ISO edition; companion forms address narrower scopes: CG 40 48 (Coverage B / personal and advertising injury only) and CG 35 08 (products and completed operations).
Key Provisions
Excludes BI and PD (Coverage A) and personal/advertising injury (Coverage B) arising from generative AI
Companion form CG 40 48 limits the exclusion to Coverage B only
Companion form CG 35 08 applies the exclusion to products/completed operations
Applies regardless of whether AI is owned, licensed, or embedded
Type: exclusion Policies: CGL
Absolute AI exclusion for D&O, E&O, and Fiduciary Liability — eliminates coverage for any claim "based upon, arising out of, or attributable to" AI use.
Key Provisions
Absolute exclusion — no coverage for any AI-related claim
Applies to claims 'based upon, arising out of, or attributable to' AI
Covers owned, licensed, and third-party AI systems
No carve-back for incidental AI use
Type: exclusion Policies: D&O, E&O, Fiduciary
Where this lands operationally
Gridex turns the compliance or coverage question into operated workflow controls: intake, review points, audit trails, and the places a person stays in the decision.
Disclaimer: This content is provided for informational purposes only and does not constitute legal advice. AI regulations and insurance policy terms change frequently. Consult with a qualified attorney or insurance professional for advice specific to your situation. Gridex makes no warranties regarding the accuracy or completeness of this information.