I used an AI editing tool that auto-captioned my video, but it left out the required “#Ad” or “Sponsored” text. The FTC’s new AI-monitoring division flagged the post and sent a Notice of Penalty Offense with a potential fine of $50,120 per violation. I turned to my insurance hoping they would pay the government.
Key Takeaways
- Fines are Uninsurable: Public policy generally forbids insuring against government fines. If you break the law, you pay the fine. Insurance won’t cut a check to the FTC.
- Regulatory Defense Coverage: Some high-end Media Liability policies have a sub-limit (e.g., $25,000) for “Regulatory Defense Costs.” They won’t pay the fine, but they will pay the lawyer to negotiate the fine down.
- 2026 Context: The FTC uses AI to scrape TikTok/Reels. You cannot hide.
- Indemnification: Check your brand contract. Often, the brand will demand you indemnify them if you screw up the disclosure and they get fined.
The “Why” (The Trap): Fines & Penalties Exclusion
Every liability policy has this section: “Exclusions: Fines, Penalties, and Punitive Damages.”
Insurers argue that if they paid your speeding tickets (or FTC fines), you would never stop speeding.
Your only hope is the Defense Costs provision.
[IMAGE: Screenshot of an FTC “Notice of Penalty Offense” letter]
The Investigation: I Called Them
I asked, “The FTC is fining me. Who pays?”
1. Hiscox (Media Liability)
- The Detail: They have a specific provision for “Regulatory Defense.” They will hire the lawyer to argue with the FTC that it was an honest mistake. This can save you thousands in legal fees.
2. General Liability (Basic)
- The Detail: Zero coverage. They will send a denial letter immediately.
3. Brand Contracts
- The Trap: I read a standard influencer contract. It said: “Influencer is solely responsible for compliance with FTC guides.” If the Brand gets fined because of my post, I have to reimburse the Brand. My insurance covers me for “Contractual Liability” in some cases, but likely not for fines.
Comparison Table
| Cost | Media Liability Policy | Standard GL Policy |
| FTC Fine ($50k) | You Pay | You Pay |
| Lawyer to Fight Fine ($10k) | Insurance Pays | You Pay |
| Brand sues you for their Fine | Maybe (Contractual Liab.) | Unlikely |
Step-by-Step Action Plan
- Edit/Archive Immediately: Add the #Ad disclosure now. Mitigation helps reduce penalties.
- Check Policy for “Regulatory Defense”: Look for that specific phrase.
- Negotiate: The FTC often issues “warnings” for first offenses if you cooperate. A lawyer paid by insurance can secure this warning instead of a fine.
- Audit Past Posts: Use an AI compliance tool to scan your back catalog. 2026 bots look at everything.
FAQ
Does “Sponsored” count?
Yes. “Ad,” “Sponsored,” and “Paid Partner” are safe. “Thanks to [Brand]” is NOT safe in 2026.
What if the brand told me not to use #Ad?
Save that email! That proves you weren’t the mastermind. The FTC might target the brand instead, but you are still on the hook for following illegal orders.
Does umbrella insurance cover this?
No. Umbrella follows the underlying policy. If the underlying policy excludes fines, the umbrella does too.