AI Liability Is Already in Your Clients’ Operations

• September 14, 2026

By Michelle Middleton

Most of your agency’s customers already use artificial intelligence (AI), whether they realize it or not. The issue isn’t the technology itself. It’s the liability that can arise when AI-enabled tools make decisions affecting customers, tenants, employees, patients or vendors, often without anyone recognizing the exposure until a claim emerges.

In Louis et al. v. SafeRent Solutions, settled in the U.S. District Court for the District of Massachusetts and approved in November 2024, a federal judge approved a $2.3 million settlement after SafeRent’s AI-powered scoring algorithm was found to have disproportionately scored Black and Hispanic applicants, as well as voucher holders, lower than other renters in violation of the Fair Housing Act.

That exposure likely never appeared on a traditional insurance application. The software operating inside the organization was never specifically evaluated because no one asked about it. That’s where agents have an opportunity to strengthen their role as trusted advisors.

Booking chatbots, hiring platforms, scheduling tools, pricing engines, point-of-sale systems, and claims technology are increasingly embedded in everyday operations. Simple questions such as: “What new technology platforms, automation tools, or AI-enabled software have you implemented since your last renewal?” can uncover exposures that traditional reviews often miss.

Whether it’s a Fortune 500 company or a Main Street business, most clients are already using AI in some form.

The Contract Won’t Save Them, and the CGL May Not Either

Many clients assume their vendor contract transfers the risk associated with AI-powered software. In reality, that protection may be far more limited than they expect.

Most software-as-a-service (SaaS) agreements cap a vendor’s liability at the value of the contract itself, often little more than the annual licensing fee. A screening tool may cost several thousand dollars a year, while litigation arising from its decisions could result in a multimillion-dollar settlement. The contractual protection available may bear little resemblance to the actual financial exposure.

In many situations, a standard commercial general liability policy may provide little or no coverage for allegations involving AI-driven discrimination, misinformation or algorithmic decision-making. Coverage A typically requires bodily injury or property damage caused by an occurrence. Coverage B applies to a defined list of personal and advertising injury offenses. Depending on the facts, AI-related allegations may not fit neatly within either framework.

The result is a potential gap between emerging technology exposures and the policies many clients assume will respond.

Adoption Is Accelerating Faster Than Risk Management

AI adoption is expanding across nearly every industry. Organizations increasingly use AI-enabled tools for customer service, hiring, pricing, scheduling, underwriting, marketing and operational decision-making. Yet governance frameworks, contractual protections and insurance products must continue to evolve as businesses identify and manage these risks.

As adoption accelerates, the greatest exposure may not be a known risk. It may be the one that was never discussed.

“Most AI exposure today is unknown because no one asked about it,” says Rob Reynolds, founder & CEO, Fall Line Specialty. “The agents who take the time to understand how AI actually shows up in a client’s operations, not just whether they ‘use AI,’ but where and how, are going to be the ones who protect their clients and the ones clients will trust most.”

“AI is changing how businesses operate, but many organizations have not yet considered the insurance implications,” says Kasey Connors, executive director of the Big “I” Agents Council for Technology (ACT). “Agents can help clients evaluate how AI is being used throughout their organizations and whether their coverage keeps pace with those changes.”

Agencies themselves are confronted with the need to clarify AI usage in their own workflows. While 68% of agencies plan to increase their use of AI in the next year, according to the 2026 Big “I” Agents Council for Technology Tech Trends Report, 55% do not have a written AI use policy. Another 23% said a policy is still in development.

4 Discovery Questions Worth Asking Your Clients

Trusted advisor status does not require becoming an AI expert. It requires asking better questions. 

Here’s one to start the conversation with: “Has your current general liability, errors & omissions or cyber carrier introduced any AI-related exclusions or endorsements at renewal, and have you reviewed the language?”

Then expand the conversation to understand their AI tool inventory: “What customer-facing software, chatbots, pricing tools, scheduling systems, or automated platforms are being used, and which have been added within the past two years?”

Here are four more questions to uncover AI-related risk:

1) Content accuracy and reliance. “Could any AI-generated information influence health, safety, professional advice or a significant financial decision? If it were wrong, do you know what the outcome may be?”

2) Algorithmic bias and discrimination. “Does your team use software tools while hiring, pricing, screening, underwriting, or approving decisions that could unintentionally produce discriminatory outcomes?

3) Vendor risk transfer. “Do vendor agreements clearly define responsibility for AI-related errors, omissions, or system failures, or are those obligations unclear?”

4) Governance and incident response. “Who oversees AI adoption within the organization, and what process would be followed if an AI-related incident or claim surfaced tomorrow?”

Most clients will never describe themselves as “using AI.” They’ll talk about the chatbot, the scheduling platform, the hiring application, the pricing engine, or the innovative software purchased from a vendor last year.

But the business world is becoming more AI-enabled every month, and losses associated with these technologies are already emerging.

No carrier, software vendor, regulator or agent has every answer yet. The legal, underwriting and risk management landscape continues to evolve in real time.

Fortunately, trusted advisors have never been defined by having all the answers. They’re defined by asking the right questions before a loss occurs. The agencies that begin those conversations today, before the renewal, before the coverage dispute, and before the claim, will be better positioned to help clients navigate the risks of tomorrow while strengthening the trust that keeps those relationships lasting.

Michelle Middleton is chief operating officer of Fall Line Specialty.