Microsoft Copilot Chat Error Exposes Confidential Emails to AI Tool

Microsoft has confirmed a configuration issue affecting Microsoft 365 Copilot Chat that led to confidential emails being processed by its generative AI assistant.

The company said the problem allowed Copilot Chat to access and summarize certain emails stored in users’ Draft and Sent Items folders within Outlook desktop — including messages marked with confidential sensitivity labels.

Microsoft emphasized that while the behavior did not meet its intended user experience, it did not grant access to anyone who was not already authorized to view the information. A global configuration update has since been deployed to enterprise customers.

What Happened Inside Copilot Chat?

Copilot Chat is integrated across Microsoft 365 applications, including Outlook and Teams, enabling employees to summarize emails, generate responses, and retrieve insights from their workplace data.

However, the recent issue caused Copilot to incorrectly process emails labeled as confidential, even when sensitivity labels and data loss prevention policies were in place. These protections are designed to restrict access to sensitive corporate information and prevent unauthorized sharing.

Reports indicate Microsoft first became aware of the bug in January. The issue was later highlighted by a service alert and reportedly attributed to a “code issue.” Notifications about the bug also appeared on a support dashboard for NHS workers in England, though officials stated that patient data was not exposed beyond authorized users.

Microsoft’s Response and Security Assurances

Microsoft stated that its core access controls and data protection policies remained intact during the incident. The AI tool did not expose confidential information to external parties, and any summarized draft or sent email content remained accessible only to its original creator.

Still, the company acknowledged that Copilot Chat is designed to exclude protected content from AI processing, and this malfunction fell short of that standard.

The fix has been rolled out worldwide for enterprise users of Microsoft 365 Copilot.

Enterprise AI Tools Under Pressure

The incident comes as organizations rapidly adopt generative AI tools to boost productivity, automate workflows, and improve collaboration. Enterprise AI assistants like Microsoft 365 Copilot are marketed as secure, business-ready solutions with enhanced governance controls compared to consumer AI platforms.

Yet experts warn that the pace of AI feature deployment increases the likelihood of misconfigurations and unexpected vulnerabilities.

Data protection analysts argue that as companies race to integrate AI into daily operations, governance frameworks often struggle to keep up. Cybersecurity professionals emphasize that AI tools should be private-by-default and opt-in, particularly when dealing with sensitive corporate or healthcare data.

The Broader AI Governance Challenge

The Copilot Chat error underscores a growing tension between innovation and security. Generative AI in the workplace offers powerful productivity gains, but it also introduces new vectors for potential data leakage — even when unintentional.

Organizations adopting AI tools must ensure strong oversight, continuous monitoring, and regular policy updates to mitigate emerging risks. Sensitivity labels, data loss prevention systems, and access controls remain critical, but they must function seamlessly alongside evolving AI features.

As enterprise AI adoption accelerates in 2026, incidents like this highlight the importance of balancing speed with caution. While Microsoft has moved quickly to resolve the issue, the episode serves as a reminder: in the race to harness generative AI, even industry leaders can face unexpected security challenges.