Insurance Exposures and Considerations for Law Firms Using AI

 

As artificial intelligence (AI) continues to evolve rapidly, its integration into the legal profession is becoming more commonplace. While AI offers significant benefits, it also introduces new considerations for law firms. Michele McCrohan of Synergy said, “We are deeply involved in insurance programs for lawyers. We hear concerns from both carriers and clients. They worry about AI claims risks and the legal or reputational costs that come with them.”

Law firms using AI, specifically those who specialize in Intellectual Property, find themselves at the forefront of the AI frontier. They are navigating this new landscape protecting client IP while employing it into their practice operations. “With the application of this advanced, time-saving technology, IP legal firms may be additionally challenged to keep up with governance and unintended pitfalls,” added Jeff Roth of Jamison IP.

 

Historical Context: AI in Legal Professions

AI has been in the legal field for nearly a decade, and its popularity continues to grow. It helps lawyers and staff analyze data, conduct document searches, and perform routine tasks. More companies are now using AI for its time-saving benefits. Law firms using AI look for help with repetitive research and writing tasks. This change may require updates in billing practices to remain competitive, potentially moving towards fee-based models due to the significant reduction in time required for certain tasks.

Access to online AI resources is now easier and more user-friendly. This helps with many legal tasks inside and outside a firm’s IT team. This can lead to problems in monitoring how employees use technology, an issue known as 'shadow IT.'  “Although there is much to be excited about with AI, if not properly managed, the information entrusted or applied to a firm’s practice could compromise integrity of opinions, client confidentiality, or result in outright malpractice with costly financial and reputational consequences,” shared McCrohan.

 

Key Exposures for Law Firms Using AI

Insurance policies can have significant variations depending on your insurance provider, making it essential for agents to review their clients' coverage carefully with a qualified broker. Look for someone who specializes in diverse legal practices including Intellectual Property firms.

As you review, consider some of the following potential claim examples law firms using AI face:

  1. Data Privacy and Security: The use of AI can pose significant data privacy and security concerns. Law firms must keep all client information private and check that the AI sources they use are safe. Misuse can lead to serious cyber risks and mistakes if it is not suited to the specific needs of the firm.

     

  2. Disclosure to Clients: Firms should tell clients when AI is used to maintain transparency and prevent misunderstandings. Law firms should establish clear guidelines for AI usage to prevent unauthorized or wrongful use by associates. D&O insurance tailored for attorneys adds needed protection for practice leaders to be covered from personal financial loss when engaging in firm activities.

     

  3. Bias and Accuracy: AI systems can exhibit biases and inaccuracies. Reliance on AI without context and validation can affect legal strategies, cause selection bias, and misconstrue data analytics. Ensuring that the information provided by AI is current, accurate, and free from bias is essential. Law firms using AI must double-check and verify AI-generated data to avoid presenting false or misleading information potentially resulting in malpractice

     

  4. Training and Development: Relying on AI may affect how junior associates grow, but it can also challenge all team members to use it correctly. Firms that train team members in AI best practices can foster career growth and client satisfaction. AI training also shows proactive risk mitigation, letting carriers know the firm is a good account to underwrite and may help you secure more favorable rates as greater attention is paid to AI governance.

 

IP Trends

“Many large and leading law firms, particularly those specializing in IP law, are establishing dedicated AI practice groups to address the proper application of the technology,” stated Roth. These specialized groups handle three main areas: copyright law, trademark protection, and patent applications. The expertise these teams develop serves to support the firm's internal AI governance and meet the growing client demand. As more businesses adopt AI, they seek out law firms with proven AI experience to guide them through this evolving landscape.

 

The Future of AI for Insurance Carriers? 

Insurance carriers are now examining AI-related risks more closely, though specific guidelines remain in early development. Underwriters are working to create evaluation frameworks for AI use in law firms as they did with cyber insurance. 

These emerging assessments will shape future insurance rates and the scope of available coverage. Insurance providers are developing new ways to evaluate protection levels for innovative law firms and establish risk management requirements. Leading law firms implementing AI technology may see these changes first, with broader industry adoption following as insurance providers actively develop new ways to assess and cover AI-related risks.

 

Conclusion

Law firms of all sizes use AI tools like ChatGPT, Gemini, and Copilot. This widespread adoption means firms need stronger risk management and loss control practices tailored to the legal industry. "A well-versed insurance partner can identify and inform proper coverages to best address the dynamic risks lawyers face," stated McCrohan. Roth added, "Law firms that master both AI integration and risk protection in their practices will be the ones that thrive in the future."

 

Obtain an Attorney Insurance Opinion

Our creative insurance specialists focus exclusively on the legal profession. We offer specialized programs from top-rated providers and have helped protect thousands of law firms nationally. Contact Michele McCrohan or Jeff Roth (IP firms) to discuss what we can do to help your attorney practice confidently embrace AI and thrive. 

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