Whether to integrate generative artificial intelligence (GAI) into an organization has been top of mind in many corporate boardrooms. In today’s rapidly evolving business landscape, GAI technology adoption holds immense promise for driving innovation, enhancing productivity, and gaining a competitive edge. However, along with GAI’s opportunities, it also brings myriad risks and uncertainties.
From data breaches to algorithmic errors, GAI’s integration into business operations introduces unique challenges that require careful risk management and mitigation strategies. One crucial aspect of risk management is securing appropriate insurance coverage tailored to the specific risks of GAI adoption. This article will explore some of the types of insurance that can be implicated in GAI-related disputes and litigation that may arise.
Types of Insurance
Commercial general liability (CGL) insurance. This insurance is often the foundation of businesses’ comprehensive insurance program. CGL insurance provides coverage for third-party bodily injury, property damage, and advertising injury claims arising from a business’s operations.
CGL insurance can also offer protection against liability claims stemming from accidents or incidents related to the deployment and use of GAI systems, such as property damage caused by AI-powered machinery or equipment.
Cyber insurance. Cyber insurance has become increasingly essential in today’s digital landscape, where even the best-protected organizations can become the victims of cyberthreats and data breaches. Cyber insurance provides coverage for expenses related to data breaches, including forensic investigations, data restoration, notification costs, and legal expenses.
Given the significant reliance on data in GAI applications, cyber insurance is critical for protecting against the financial and reputational damage resulting from cyberattacks, data breaches, and unauthorized access to sensitive information.
Errors and omissions (E&O) coverage. E&O coverage, also known as professional liability insurance, is designed to protect businesses and professionals against claims of negligence, errors, or omissions in the provision of services. E&O coverage can provide financial protection against claims arising from errors or inaccuracies in GAI-generated content, recommendations, or decisions. This coverage is essential for mitigating the risk of liability claims related to GAI systems’ performance or functionality.
Malpractice insurance. For doctors, accountants, lawyers, and some other professions, E&O coverage is often referred to as malpractice insurance. This plays a critical role in offering protection for a range of possible claims. Depending on how litigation arises from GAI-related harms, malpractice insurance can offer protection for the targeted professional.
Business interruption coverage. Business interruption coverage protects businesses against financial losses resulting from disruptions to normal business operations. This type of coverage can provide reimbursement for lost income, ongoing expenses, and additional costs incurred because of unforeseen interruptions or downtime caused by GAI-related incidents, such as system failures, cyberattacks, or data breaches. This coverage helps businesses mitigate the financial impact of operational disruptions and maintain continuity during challenging times.
Directors and officers (D&O) insurance. D&O insurance provides coverage for the personal liability of directors and officers of a company arising from their managerial decisions and actions. D&O insurance can offer directors and officers protections against claims alleging mismanagement, negligence, or breaches of fiduciary duty related to decisions about GAI adoption, implementation, or oversight.
This coverage also aids in attracting top talent to leadership positions and protecting key decision-makers from personal liability risks.
Call to Action
Some GAI-related harms could be covered by existing insurance policies. GAI adoption and integration has become ubiquitous enough that carriers could implement exclusions for an insured using GAI. When making GAI adoption decisions, it’s important for organizations to contact their broker and/or review existing policies to look for clauses that address GAI or carve out exclusions.
But absent such exclusionary language, depending on the type of harm stemming from GAI adoption, a variety of insurance types can aid organizations that want to pursue GAI transformation with the added reassurance that insurance will cover the cost of harms.
Takeaways
As businesses embrace GAI technologies’ potential, proactive risk management and insurance planning are essential for safeguarding against potential liabilities and disruptions. By securing comprehensive insurance coverage tailored to GAI adoption risks, businesses can protect their assets, mitigate financial exposure, and foster confidence in their AI investments.
Partnering with experienced insurance providers and risk management experts is critical for designing a robust insurance program that addresses the diverse and evolving risks of GAI adoption. By staying informed, proactive, and well prepared, organizations can navigate the complexities of GAI-related liabilities and thrive in the GAI age.
Devin Bates is an attorney with Mitchel Williams in Little Rock. He can be reached at dbates@mwlaw.com.