Generative AI is a processing tool built on deep machine learning that can digest colossal amounts of data. It can synthesize, translate, analyze and summarize dense information in a human tone. Its responses and interactions may seem human, but it’s programmed that way.
For all of AI’s perks, there are just as many risks. Practical questions remain: How can AI help your business and how do you ensure the risks?
AI implementation considerations
While it’s true that AI can be resource-intensive at the outset, it could offer long-term advantages if you appropriately implement it. Implementation requires a lot of planning, including addressing cybersecurity, intellectual property and data privacy concerns. Using AI could also impact job roles.
Make a plan to navigate these changes. Adopt policies around AI and be transparent about how you intend to use it in your operations.
AI tools require a layered approach to risk mitigation
There isn’t a specific type of insurance for AI liability yet. But you can insure against the evolving AI risks using layers of insurance, including the following:
| Insurance | The liability it covers |
| Cyber liability or data breach insurance | This covers legal fees and expenses associated with cybercrime. For example, cyber liability insurance will help pay for network restoration and required personal identity monitoring if a cyberattack exposes personal data. Any business that uses an internet-connected computer or device needs this insurance. |
| Technology errors and omissions (E&O) insurance | This covers software developers and technology consultants for negligence, mistakes, or failure in their professional duties. If you recommend AI products or work in the technology field, this coverage is for you. |
| Intellectual property insurance | This covers litigation expenses for lawsuits involving intellectual property infringement. It is essential coverage since generative AI can output content that infringes on others’ intellectual property. |
| Media liability insurance | This covers allegations that your content harmed someone financially or caused them emotional distress. Claims could involve copyright infringement, vicarious infringement or defamation.
Consider a policy if you’re using AI chatbots to generate content online or interact with the public. Your AI tool could malfunction or get hacked and generate harmful content, which you’d be liable for. You could also be vicariously liable for the content of your paid influencers, including copyright infringement. That’s even if you had nothing to do with creating it. |
| General liability insurance | This covers legal fees and payments resulting from physical harm. For example, if a robot or AI-powered machine you operate causes an accident, your general liability insurance will respond. |
| Directors and officers (D&O) insurance | This covers your management team if you get sued. D&O coverage helps with legal fees and settlement costs. It is essential if you serve on a board outside of your business. Board members, directors and officers can be held personally liable for injuries and damages. |
| Professional liability insurance | This protects your business against claims of inadequate work or negligent actions. It’s also known as errors and omissions (E&O) insurance. |
| Employment practices liability insurance (EPLI) | This coverage is for when an employee sues you. General liability won’t cover you for lawsuits related to employee complaints. General liability covers third-party claims, like ones made by customers or the public.
EPLI covers you when an employee sues you for things like:
For example, you’re at risk if you use AI to sift resumes, create knowledge and skill assessments, check references, and conduct interviews with face and voice analysis. You could be sued for violating federal antidiscrimination laws if you don’t use robust supervision and testing protocols for your AI tool. |
| Supply chain liability insurance | This protects your company against financial losses caused by disruptions in the supply chain due to natural disasters, political unrest, logistical errors, supplier insolvency or cyberattacks.
If you or one of your vendors uses AI, you could experience losses because of inaccurate predictions, automation errors or system outages. This could result in lost orders or reputational damage. Look for third-party coverage to protect against losses caused by providers in your supply chain. It can help with claims made against you for supply chain issues, like late deliveries, product defects or noncompliance with regulations. |
| Employee theft or crime insurance | This covers you for insider threats like employee theft. Most policies don’t cover losses when an employee is involved. Add employee theft to your policies to safeguard against internal corruption. |
Your vendors’ AI could be your risk
Even if your company isn’t using AI directly, your vendors might be—and that can expose you to liability. Understand how they’re using AI and who’s responsible if it fails.
A vendor’s AI tool confirms orders it never placed. The error causes a supply chain backlog and client loss. Who’s liable—you or them?
What to do:
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Ask vendors about their AI use and who holds liability.
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Look for signs of responsible tech use: employee training, warranties, tech E&O insurance.
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For international vendors, confirm AI use complies with local laws—consult legal counsel before signing cross-border contracts.
Strengthening your cyber liability insurance application
Cyber liability insurance can help your business recover after a cyberattack—but only if your application is strong and accurate.
What insurers look for:
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Data-sharing and storage practices
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Cybersecurity strategy
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Incident response plan
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AI use and system details
Be honest—omitting or overstating details can lead to denied claims. For help assessing your risks, visit the Cybersecurity & Infrastructure Security Agency.
Stay vigilant and protect your liability
Have AI initiatives at your company or rely heavily on vendors? Contact us to discuss how that may impact your coverage, including third-party liability. We’re here to help.