Artificial intelligence is reshaping business operations, but it also brings new and complex risks. The lawsuit,
Why your legacy insurance still matters
While AI may be at the center of new headlines, the core risks—like bodily injury—are nothing new. Traditional commercial general liability (CGL) policies have long provided coverage for injury-related claims, regardless of whether the root cause is human error or advanced technology.
The same pattern appears in other emerging cases. Consider A.F. et al. v. Character Technologies, Inc. et al., No. 2:24-cv-01014 (E.D. Tex.), where plaintiffs allege that an AI-driven platform poses dangers such as increased risks of suicide, self-harm, and other mental health issues. While the technology is novel, the underlying allegations—failure to prevent harm, inadequate warnings—are familiar territory for insurers and risk managers.
Legacy insurance lines like directors and officers (D&O) coverage are also being put to the test in the AI era. In Sarria v. Telus Int'l (Cda) Inc. et al., No. 1:25-cv-00889 (S.D.N.Y.), plaintiffs claim that company leaders failed to adequately disclose the financial impact of AI initiatives, leading to shareholder losses. The specific context—AI-driven misrepresentations—may be new, but the legal theory of misrepresentation is well-trod ground under D&O policies.
What connects Raine, Character Technologies, Telus, and other cases like them is not the technology itself, but the continuity of foundational legal risks—bodily injury, misrepresentation, breach of duty, etc. Most established insurance policies are designed to address these risks, even as circumstances evolve. In fact, the majority of legacy lines—whether employment practices liability, cyber, or intellectual property—continue to respond to claims as long as the basic elements of liability are triggered.
Ultimately, the rapid growth of AI-related lawsuits does not erase the relevance of legacy insurance.
Practical steps for risk managers: 10 essential tips for AI risk
Risk managers must evolve with technology, but the fundamentals of insurance and governance remain critical. To help organizations address AI-related exposures consider these 10 actionable steps:
- Review legacy coverage. Don't assume AI risks are excluded. Assess your existing policies for coverage for potential AI-related claims. Often, these provide broader protection than expected.
- Check all relevant policies. Analyze every lawsuit or claim to identify all possible sources of coverage. AI incidents may implicate multiple policies—CGL for bodily injury, D&O for leadership decisions, and more.
- Leverage third-party insurance. Your partners and vendors may hold insurance that covers shared AI risks. Ensure your company is listed as an additional insured, if possible, to expand your protection.
- Watch for AI-specific exclusions. Insurers increasingly add exclusions for AI-related risks. Regularly review policy language to ensure new technologies haven't been carved out, and update coverage as needed.
- Take AI underwriting seriously. Respond accurately to carrier questions about your use of AI. Understating or misstating exposure can jeopardize coverage or trigger rescission.
- Consider AI-focused insurance products. If you find gaps in legacy coverage, explore newer products designed for AI risks. These may offer protection for algorithmic errors, data misuse, or regulatory issues.
- Engage all stakeholders. AI risk is enterprise-wide. Involve HR, compliance, IT, operations, and legal teams in risk assessments to understand how AI is used and where vulnerabilities may lie.
- Review coverage regularly. Don't wait for a claim to assess insurance. Schedule regular reviews and involve experienced coverage counsel to address potential exposures before problems arise.
- Appoint a chief AI officer. Designate a leader to oversee AI strategy, compliance, and risk management. This role coordinates efforts across departments and ensures your organization keeps pace with evolving risks.
- Invest in AI training and education. Provide ongoing education for employees, managers, and the board. Understanding AI and its risks empowers teams to spot exposures early and respond effectively.
While AI is transforming business risks, traditional insurance coverage remains essential. The rapid evolution of AI-related risks make established insurance principles more vital than ever: anticipate challenges, act proactively, and engage the right stakeholders.
