AI and Professional Liability

One of the best parts of working in insurance is that no day is the same as the last. Coverages evolve, carriers change their appetites, and new exposures continually emerge. As they say, the only constant is change—and nowhere is that more apparent today than in technology.

Artificial intelligence is rapidly changing our world and will continue to do so over the next several years. While AI offers tremendous opportunities, it also brings new risks that businesses, insurance professionals and carriers need to understand.

AI Is Already Changing the Insurance Industry

AI is helping the insurance industry in countless ways, from reading applications and policy forms and comparing coverage, to assisting with underwriting and rating accounts. AI can also play a role in the claims process on both the carrier and policyholder sides.

At this point, the potential uses of AI seem almost endless.

With AI becoming so widely used not only in insurance, but across nearly every industry, an important question arises: What does this mean for insurance coverage?

What About Professional Liability?

For professional liability policies, AI exclusions have not yet become standard across the market. Many professional liability policies remain silent regarding AI.

However, carriers are beginning to pay much closer attention to the exposure. Rather than simply excluding AI altogether, we are starting to see insurers address the exposure through policy definitions, underwriting questions, coverage restrictions and, in some cases, sublimits.

I expect this area to continue evolving quickly, particularly when it comes to generative AI such as ChatGPT, Claude and Microsoft Copilot.

The distinction is important. Generative AI doesn’t simply process existing information; it can create new content. That content might include reports, analyses, recommendations, legal research, policy comparisons, correspondence and other professional work products.

The professional liability concern arises when a professional relies on AI-generated content without adequately verifying its accuracy and then provides that information to a client.

When AI Gets It Wrong

Generative AI has been known to produce information that sounds authoritative but is inaccurate, or even completely fabricated. These errors are commonly referred to as AI “hallucinations.”

We have already seen this exposure play out in the legal profession.

In the recent LNU v. Blanche matter before the Ninth Circuit, two attorneys filed briefs containing nonexistent cases, misattributed quotations and material misrepresentations of actual cases resulting from generative-AI hallucinations. Importantly, the issue wasn’t simply that the attorneys used AI. The problem was that inaccurate AI-generated material was submitted to the court without being properly verified.

The consequences included monetary sanctions and a six-month suspension from practice before the court.

That distinction is extremely important from a professional liability standpoint.

AI may be the tool that creates the error, but the professional remains responsible for the product delivered to the client.

The same basic exposure can apply to virtually any professional. An engineer could rely on an incorrect building code generated by AI. A consultant could incorporate fabricated data into a client report. An insurance agent could rely on an AI-generated policy comparison that incorrectly states that a particular coverage is included.

In each case, AI may have created the error, but the resulting allegation against the professional could look very much like a traditional E&O claim.

AI Could Also Increase Claim Frequency

There is another side of the AI discussion that may ultimately be just as important to professional liability carriers.

AI isn’t only being used by professionals. Their clients are using it too.

Many professional liability policies define a claim to include some form of written demand against an insured seeking damages or other relief arising from an alleged wrongful professional act. Depending on the specific policy wording, that written demand doesn’t necessarily have to be a lawsuit drafted by an attorney.

Generative AI has made it significantly easier for individuals and businesses to create sophisticated demand letters on their own.

That means a dissatisfied client who might previously have sent an informal complaint—or done nothing at all—can now use generative AI to produce a formal-looking demand letter alleging negligence, identifying damages and demanding compensation.

Some of those demands may ultimately have merit. Others may not. But either way, they may need to be reported, evaluated and potentially defended.

From an E&O standpoint, AI therefore presents an interesting two-sided exposure: professionals are using AI to perform their services, while their clients are using AI to pursue claims against them.

What Should Brokers Be Watching?

While broad AI exclusions are not yet the norm across professional liability insurance, I expect policy language surrounding AI to continue developing rapidly.

Over the next 6–12 months, brokers should pay particularly close attention to renewal quotes and new endorsements addressing artificial intelligence and, specifically, generative AI.

An especially important question will be how broadly those exclusions are written.

If an insurance agent uses generative AI to compare two policies and the AI misses an important exclusion, is that fundamentally an AI loss, or is it a traditional professional negligence claim involving a new tool?

That’s a question the professional liability market will increasingly have to address.

For brokers, the takeaway is simple: don’t assume that this year’s professional liability policy provides the same protection as last year’s policy.

Read the endorsements. Watch for new AI definitions, exclusions and sublimits. Ask how the insured is using AI in its professional services. And, most importantly, understand whether new AI wording could unintentionally remove coverage for the very professional services the policy was purchased to protect.

AI is changing quickly. Professional liability insurance will have to change with it.