Artificial Intelligence is an emerging technology that rapidly has infiltrated all aspects of everyday life, including business and commerce. AI allows users to quickly perform and complete tasks that ordinarily would take substantial time, energy, and human effort to achieve a finished result. AI products are readily available to users, both in free, open source formats (e.g., ChatGPT) and through paid subscription services tailored to specific professions.
The allure of AI is significant. The impact of unchecked reliance on AI, however, can be disastrous as results often prove to be inaccurate and inexact. In the context of insurance coverage, AI may result in unintended exposures under traditional insurance policies (commercial general liability, professional liability, property, and the like) for losses caused by or arising from the use of AI where no such coverage was intended or even anticipated by underwriters, and where the risk of AI was not accounted for in policy premiums.
In recent years, insurers have experienced similar “silent” exposures to traditional insurance policies in the context of cyber losses. The concept of “Silent Cyber” emerged, with traditional policies found to be at risk of covering losses caused by cyber events when carriers did not intend such coverage and no premium was collected for cyber risks. As an example, insureds have sought coverage for hacking losses suffered by customers under CGL Coverage B, Personal and Advertising Injury, on the basis the hacking resulted in oral or written publication of materials violating the customers’ right to privacy. See, e.g., Zurich Am. Ins. Co. v. Sony Corp. of Am., 651982/2011 (N.Y. Supr. Ct. Feb. 21, 2014), appeal, 6 N.Y.S.3d 915 (1st Dept. 2015) (dismissed due to settlement). Insureds also have sought coverage for loss of funds transferred to criminals in email scams under computer fraud provisions of business liability and crime policies. See, e.g., Am. Tooling Ctr., Inc. v. Travelers Cas. & Sur. Co. of Am., 895 F.3d 455 (6th Cir. 2018). Carriers did not contemplate these cyber risks when the policies were issued, but nonetheless could face exposure for “Silent Cyber” coverage.
With the proliferation of AI, insurers similarly may see an increase in claims under traditional policies for losses caused by the use of AI, when carriers did not intend to provide such coverage, i.e., “Silent AI.” This may be particularly true in the professional liability context where professionals increasingly are using AI in their day-to-day business operations. Insured lawyers, for example, may use AI for assistance in research and briefing. In a number of recent cases, courts have admonished lawyers for using AI in court filings, which has led to errors and even fabrications in legal citations, the result of unchecked AI. Courts are contemplating new consequences for lawyers using AI, which could include fines, sanctions, mandatory continuing legal education, referral to state boards, and even temporary suspensions. Clients also ultimately may assert claims against lawyers who have used AI in providing their services for errors in rendering those services and for misrepresentations regarding the services being provided. Professional liability policies commonly provide coverage on a claims-made basis. As such, errors caused today by an insured professional’s use of AI could result in claims in future policy years. Carriers, thus, are in a position to prepare for those potential claims now with the experience of “Silent Cyber” as a guide.
In the context of “Silent Cyber,” the insurance market responded to the previously unforeseen cyber claims with the creation of standalone, affirmative cyber insurance policies, as well as express cyber exclusions endorsed to standard insurance policies. Insurance applications also were modified to include new cyber-related questions to ensure carriers have a full picture of the nature of a prospective insured’s operations and potential cyber exposure before coverage is offered and bound. The same approach can be taken with “Silent AI.” For future policy years, carriers can consider offering affirmative coverage for AI claims and losses at an appropriate premium or excluding coverage for claims arising out of the use of AI through a specific policy exclusion or endorsement. Insurance applications also can be amended to include specific inquiries regarding a prospective insured’s use of AI within its business and the applicant’s policies and procedures in place to guard against the risks of using AI technology.
The continued use of AI by insured professionals is inevitable. Carriers should prepare for the coming wave of “Silent AI” claims under traditional insurance policies and should use “Silent Cyber” as a roadmap for addressing coverage for those claims going forward.