Is Your Small Business Insured Against AI-Related Risks and Claims?
Historically, new technological advancements have consistently outpaced the ability of legislators and regulators to establish workable legal frameworks to address changing technological landscapes and the concomitant risks. Artificial intelligence (AI) is the latest innovation driving an urgent need for new regulation and the evolution of existing marketplace products, including insurance industry offerings.
Specifically, as more companies integrate AI into ever-expanding areas of their operations, current insurance products may be insufficient to cover all potential liabilities that could arise due to the use of AI in business.
For example, AI is driving the review and evolution of several different types of insurance products such as general liability, errors and omissions, professional liability, crime, employment practices, and cybersecurity policies and endorsements. Insurance companies also are developing coverages specific to AI, in addition to amending prior policy language to incorporate AI-related concepts and risks. As coverages evolve, small businesses should assess their existing coverage(s) to ensure they are sufficiently protected from AI-related potential liabilities, especially where a business seeks to embed AI within its operations.
The incorporation of AI technology into your business, while often prudent and reasonable, could prove disastrous if not done in conjunction with a robust review of insurance coverages. As sophisticated as AI is, the technology isn’t any less vulnerable to bad actors, especially AI systems that handle sensitive data or consumer information. Accordingly, cybersecurity and/or cybercrime insurance is essential for businesses that use AI, as those products can cover losses associated with data breaches, cyberattacks, cybercrimes, and other digital threats. Cybersecurity insurance typically includes coverages such as:
- Data Breach Coverage: This covers the costs of notifying affected parties, credit monitoring services for customers, and legal fees.
- Network Security Liability: Protects against claims arising from a failure to protect data, such as through unauthorized access or malware.
- Business Interruption: Covers lost income and extra expenses incurred while recovering from a cyberattack.
Given the complexity of AI systems, the increasing sophistication of cybercriminals and hackers, and the potentially catastrophic financial, legal, and reputational costs of data breaches and other cyberattacks, robust cybersecurity insurance has become critical for small businesses.
Small business owners should consult with experienced coverage counsel to analyze how they are deploying AI technology and whether their existing insurance coverages are sufficient. If you have any questions or concerns regarding your business’s insurance coverage for AI risks, please contact Matthew Mitchell at Maddin Hauser.