Risk Management: AI-Related Liabilities & Insurance

Gallagher recently published an article on the AI-related liability landscape and the insurance industry’s response to it. This excerpt discusses some of the potential AI-related liabilities companies face and the insurance coverage needed to respond to them:

As for product liability, the MIT AI Incident Tracker shows, for example, repeated incidents of autonomous vehicles being involved in collisions with vehicles and pedestrians. How product liability coverage would respond to such a scenario depends on how the AI system is defined and if it’s regarded as the product with respect to policy wordings, jurisdiction and specific exclusions.

In the employers’ liability space, claims could arise from incidents where, for example, an AI tool used to vet job applications discriminates in some way, or where AI replaced job roles. For, instance, one tech company was compelled to scrap a resume screening program after it was found to discriminate against women.

In the professional indemnity market, meanwhile, there are concerns about medical malpractice claims arising from the use of AI tools for diagnosing health issues. AI incidents could also prompt allegations that company boards and leadership failed to carry out proper due diligence prior to licensing and implementation, impacting D&O coverage.

Deliberate corruption of original AI training data before deployment is a risk that insurers are watching closely, according to [John Farley, managing director of the Cyber Liability practice at Gallagher]. “There are many coverage issues associated with data poisoning, and we’re already seeing some carriers out there affirmatively covering that risk.”

There’s potential for other sources of financial loss relating to the use of AI. Business interruption is a key insurance coverage issue for downstream users of AI platforms, for instance. Recall of a major AI model due to errors that require retraining could cause a cascading loss for thousands of businesses relying on the platform.