The benefits of AI according to Liberty Mutual:

• Improves many business processes
• Supports comprehensive decision-making
• Helps identify patterns and trends leading to changes in strategies, goals and objectives
• Streamlines compliance processes

AI risks for businesses, according to Ward and Smith:

• Discrimination and bias if used in hiring, lending pricing or other decisions.
• Intellectual property infringement on copyrights, trademarks or trade secrets.
• Privacy and data security of personal data if used for analytics or behavioral targeting.
• Bodily injury and property damage if AI systems control physical processes or devices; for example, if AI directs a piece of equipment to operate unsafely, or if a medical AI tool recommends incorrect treatment.
• Product Liability if AI is embedded in a product, defects in design or decision-making logic.
• Reputational harm due to AI-generated content that contains defamatory statements, inaccurate information or misleading information.

How existing policies MAY respond to risks, according to Ward and Smith:

• Commercial General Liability may respond to a claim for bodily injury or property damage caused by AI process, malfunction or advertising.
• Professional Liability and Errors and Omissions (E&O) may respond to errors or omissions in the performance of professional services if AI causes the error.
• Cyber / Data Breach Insurance may respond to data breaches, privacy liability, and network security incidents if caused by AI. However, the trend is that some Cyber policies are beginning to exclude losses arising from AI.
• Directors and Officers (D&O) Insurance may cover claims against directors and officers for wrongful acts as corporate leaders if based on AI. However, the trend is to hold individual executives accountable for cybersecurity, technology failures and AI governance.
• Employment Practices Liability (EPL) may cover claims of discrimination, harassment, wrongful termination, etc., if based on AI. However, this is an evolving area.

All the above areas are evolving, and insurers MAY argue whether the current policy covers it. So, what should I do as a business owner? 

• Risk management strategies to mitigate liabilities, according to Liberty Mutual and Ward and Smith:
  • Evaluate potential risks.
  • Implement protective safeguards.
  • Review your current policies through an AI lens.
  • Create and document your AI Governance Policies.
  • Coordinate insurance with a broader AI Risk Management Strategy.

Whitlock’s Pro Tip: Proactively contact your insurance agent to review your current insurance policies, understand current coverage and limits, identify potential gaps, and modify policies to limit coverage gaps and potential litigation.