Long Island Businesses Face New AI Liability Risks as 2025 Regulations Reshape Insurance Requirements

As artificial intelligence rapidly transforms business operations across Long Island and New York, companies are discovering that their traditional insurance policies may not provide adequate protection against emerging AI-related liabilities. As 2025 nears its end, claims professionals should be aware of trends in liability-expanding state legislation that addresses artificial intelligence use. The rapid integration of AI into myriad business functions and everyday life has, unsurprisingly, led to numerous avenues of AI liability exposure. In addition to common-law causes of action regarding AI impacts, state legislatures have been enacting laws to regulate AI at a brisk pace.

New York’s Groundbreaking AI Regulations Take Effect

New York’s Responsible AI Safety and Education Act (RAISE Act) was signed into law on December 19, 2025, imposing transparency, compliance, safety and reporting requirements on certain developers of large frontier artificial intelligence (AI) models, as well as penalties for violations of these requirements. While the RAISE Act primarily targets large AI developers with over $500 million in revenue, its impact extends far beyond these companies to affect Long Island businesses that rely on AI systems in their operations.

The law creates a new AI oversight office within the New York Department of Financial Services (DFS). That office will require covered developers to register with the state, assess fees to fund oversight, issue regulations as well as guidance, and publish annual reports on AI safety risks. This regulatory framework signals a shift toward more stringent oversight of AI technologies across all business sectors.

Insurance Industry Responds with New Exclusions

Insurance companies are rapidly adapting to these regulatory changes by introducing AI-specific exclusions and limitations. Verisk’s ISO Core Lines and Emerging Issues teams developed new general liability endorsements that allow carriers to exclude generative AI exposures. Effective January 2026, these exclusionary forms provide insurers with the ability to “generally exclude this emerging exposure,” according to Verisk.

Insurers, apparently concerned with AI loss coming within the scope of coverage under existing coverage lines, are looking for ways to limit or exclude coverage via AI-specific exclusions and endorsements. Most of these exclusions purport to be near absolute in scope, precluding coverage in full for any claim in any way related, directly or indirectly to the usage of any AI.

Growing Liability Exposures for Long Island Businesses

The regulatory landscape is creating new liability pathways that Long Island businesses must navigate. These laws address topics ranging from professional licensing to whistleblower protections, and many of these laws have created new private rights of action and civil liability exposures. Insurance claims based on certain of these liability-expanding statutes are a certainty.

Collectively, these trends will reshape the liability landscape for all companies incorporating AI solutions into their business operations. Claims professionals and underwriters should be aware of these novel pathways to liability, as any novel private rights of action authorized under AI-related statutes signal expanding liability exposures for all businesses incorporating AI solutions.

Practical Steps for Business Compliance

Long Island businesses need to take proactive steps to address these emerging risks. Review your policies to identify exclusions and confirm they align with your operations and emerging legal standards. Reassess retention levels and coverage limits to ensure they reflect your organization’s risk exposure.

For businesses using AI systems, it’s crucial to understand that most cyber policies are designed to cover traditional data breaches and network intrusions, many exclude or narrowly define losses involving AI systems. For example, policies may not cover: Failures or errors in AI-generated content or decision-making tools; Unauthorized access, manipulation or poisoning of machine learning models.

The Role of Experienced Legal Counsel

Given the complexity of these evolving regulations and insurance requirements, Long Island businesses should work with experienced legal professionals who understand both the regulatory landscape and local business needs. A knowledgeable business lawyer long island can help navigate the intersection of AI compliance requirements, insurance coverage gaps, and liability management strategies.

The Frank Law Firm P.C., located in Old Brookville and serving Long Island businesses, understands the challenges companies face in adapting to new regulatory requirements. With their comprehensive approach to business law and commitment to client service, they help businesses develop strategies to manage emerging risks while maintaining operational efficiency.

Looking Ahead: Federal vs. State Regulation

Governor Kathy Hochul signed the bill just eight days after President Trump issued an executive order announcing a policy to establish a “minimally burdensome” national standard for AI and directing the Department of Justice to challenge state laws deemed inconsistent with that goal. The RAISE Act may face federal opposition following a December 11, 2025, executive order, which seeks to ensure there is a unified, minimally burdensome national AI regulatory framework.

Despite potential federal challenges, you can expect to see a patchwork of state-by-state compliance requirements for multistate businesses in the near term. This regulatory uncertainty makes it even more important for businesses to work with legal counsel who can help them navigate changing requirements and ensure adequate insurance protection.

Immediate Action Items

Long Island businesses should immediately assess their current AI usage and insurance coverage. Following business-specific AI audits, companies may wish to meticulously review their insurance programs to identify potential coverage gaps that could lead to uninsured liabilities. As insurers adapt to the evolving AI landscape, companies should be vigilant about reviewing their policies for AI exclusions and limitations. When traditional insurance products fall short, businesses might consider AI-specific policies or endorsements to facilitate comprehensive coverage that aligns with their specific risk profiles.

The convergence of new AI regulations and evolving insurance requirements creates both challenges and opportunities for Long Island businesses. Those who act proactively to understand these changes and adapt their compliance and risk management strategies will be better positioned to thrive in the AI-enabled economy while protecting themselves from emerging liabilities.