AI-Related First-Party Losses (ARL)

The optional AI-Related First-Party Losses (ARL) add-on protects your business against additional costs caused by errors or malfunctions of AI systems used in your business operations – for example incorrect or hallucinated AI outputs, erroneous actions by AI agents or incorrectly processed data.

AI-Related First-Party Losses – When AI Errors Affect Your Own Business

Artificial Intelligence can automate processes, generate content, analyse data and make or trigger decisions. But what happens if an AI system produces an incorrect result or an autonomous AI agent initiates the wrong process?

Not every AI error causes damage to a client. Sometimes your own business has to deal with the consequences: incorrect data has to be restored, faulty processes have to be reversed or employees have to spend additional time correcting AI-generated results.

This is where the optional AI-Related First-Party Losses (ARL) add-on comes in. It covers necessary and proven additional costs resulting from certain malfunctions or errors of AI systems used in your insured business operations.

ARL Protects Against AI Output Errors

• Faulty, inaccurate, incomplete or hallucinated AI outputs
• Unintended or erroneous actions by AI agents, e.g. an autonomous or semi-autonomous agent triggers an incorrect decision or business process
• Incorrect processing, interpretation or generation of data by an AI system

A malfunction is considered an insured AI Output Error if the AI system deviates from its intended functional process and produces faulty or unintended results or actions.

What Costs Are Covered?

If an insured AI error occurs, ARL reimburses necessary and documented additional costs incurred to identify, mitigate and remedy the problem.

This can include:

• Analysis and troubleshooting costs, e.g. root-cause analysis, model verification, rollback or deactivation of faulty AI agents
• Recovery, correction or recreation of data that has been incorrectly processed, generated or modified by an AI system
• Additional internal personnel costs, e.g. documented overtime or extra work
• Temporary or replacement staff required as a result of the AI-related loss
• Manual post-processing and temporary workarounds needed to maintain business operations
• External experts, consultants or service providers required to resolve or mitigate the AI-related problem

The important point is that these must be additional expenses caused by the insured AI error. Normal salaries and other operating costs that would have been incurred anyway are not reimbursed.

Example: An AI Agent Triggers the Wrong Process

Your company uses an AI agent to automate internal workflows. Due to an error, the agent repeatedly triggers an incorrect process and modifies data that should not have been changed.

The AI agent has to be deactivated, the cause of the error analysed and the affected data restored. Employees work additional hours to manually process transactions until the system is working correctly again.

The necessary additional costs for troubleshooting, rollback, data recovery, additional personnel expenses and temporary workarounds can be covered by ARL.

What Is Not Covered?

ARL does not cover:

• Third-party claims
• Costs for developing new or additional AI functionality that goes beyond repairing the insured error
• Loss of revenue

The module therefore focuses on the actual additional costs required to remedy an insured AI-related first-party loss, rather than compensating for lost turnover or financing improvements to the AI system.

Compensation Limit and Deductible

The AI-Related First-Party Losses (ARL) add-on provides a compensation limit of € 50,000 per insured event and insurance year, the deductible is:€ 1,000 per insured event.