TheCorporateCounsel.net

The AI boom has resulted in efforts by many companies to promote their use of AI tools in their businesses.  However, overenthusiastic promotional efforts can cross the line into outright misrepresentations and have led to a rise in “AI washing” claims by private plaintiffs.  A recent Hunton Andrews Kurth blog reviews two securities class action lawsuits targeting corporate directors and officers and raising allegations of AI washing and discusses the importance of comprehensive D&O coverage to protect corporate fiduciaries against these claims.  The memo recommends the following actions to maximize the level of protection under D&O policies:

Policy Review: Ensuring that AI-related losses are covered and not excluded under exclusions like cyber or technology exclusions.

Regulatory Coverage: Confirming that policies provide coverage not only for shareholder claims but also regulator claims and government investigations.

Coordinating Coverages: Evaluating liability coverages, especially D&O and cyber insurance, holistically to avoid or eliminate gaps in coverage.

AI-Specific Policies: Considering the purchase of AI-focused endorsements or standalone policies for additional protection.

Executive Protection: Verifying adequate coverage and limits, including “Side A” only or difference-in-condition coverage, to protect individual officers and directors, particularly if corporate indemnification is unavailable.

New “Chief AI Officer” Positions: Chief information security officers (CISOs) remain critical in monitoring cyber-related risks but are not the only emerging positions to fit into existing insurance programs. Although not a traditional C-suite position, more and more companies are creating “chief AI officer” positions to manage the multi-faceted and evolving use of AI technologies. Ensuring that these positions are included within the scope of D&O and management liability coverage is essential to affording protection against AI-related claims.

– John Jenkins