AI Isn’t Liable for the Mistake. You Are.

Artificial intelligence is powerful.
It’s also wrong more often than people want to admit.

If you use AI to support or deliver professional services, any mistake it makes is still your responsibility. Not the software’s. Not the vendor’s. Yours.

That reality is why Professional Liability Insurance — also known as Errors & Omissions (E&O) or Professional Indemnity Insurance — matters more today than it did even a year ago.

When AI Hallucinates, Courts Don’t Care

A recent New York Supreme Court case, Cassata v. Michael Macrina Architect, P.C., made this painfully clear.

In defending a lawsuit related to a building collapse, legal counsel relied on AI‑generated citations that turned out to be inaccurate and, in some cases, entirely fabricated. The court found the conduct incompetent and sanctionable.

The judge didn’t mince words. Filing nonexistent decisions, fabricated quotations, or unsupported legal propositions was deemed frivolous and unethical — regardless of how the content was generated.

The penalties were modest because this lawsuit was for a modest amount. There are many lawsuits in other professional situations that can quickly escalate into a seven‑figure liability.

This Isn’t Just a Legal Issue

Law firms aren’t alone.

All professional service providers — accountants, architects, engineers, consultants, financial advisers, medical professionals — face the same exposure when AI is part of the workflow.

AI continues to make mistakes. Not hypotheticals. Real ones. Including:

• False accusations
• Biased or discriminatory outputs
• Incorrect financial or legal conclusions
• Misdiagnoses and unsafe recommendations
• Misapplication of data
• Recommendations that put people or businesses at unnecessary risk.

As one insurance executive put it plainly: If a client relies on your advice, AI errors are still your errors.

As Berkshire Hathaway Vice President Sean Clifford told Risk & Insurance magazine:“When operating as a professional service firm, your customers look to you for guidance and rely on your expertise. This expectation is no different whether that service is provided by a human being, a human being supported by AI, or AI itself. Any errors, inaccuracies or negligence in the rendering or performance of these professional services could ultimately result in liability.”

Clients and courts don’t care whether a human made the mistake, a human used AI, or AI acted independently. They hired you.

Professional Liability Hasn’t Changed. The Risk Has.

Professional Liability Insurance exists to protect your company against the following scenarios, whether generated by AI or humans: 

• Negligence – 
• Breach of professional duty – 
• Missed deadlines – 
• Errors in advice or execution – 
• Failure to deliver services as promised.

What has changed is how easily errors can scale when AI is involved — and how quickly small mistakes can turn into large claims.

While AI can reduce errors, it doesn’t eliminate professional responsibility. It amplifies it.

What This Means for Your Business

If AI touches your professional services in any way — drafting, analysis, recommendations, decision support — you should assume it increases your exposure, rather than reducing it.

Insurance companies are increasingly aware of this risk and are asking about insureds’ use of AI in their businesses. Depending on the responses, coverage may be curtailed or excluded. 

Work with your broker to make sure your Professional Liability program covers the responsible use of AI so your business is properly protected. 

Additionally, draft strong internal guidelines regulating the use of AI by professionals in your organizations. Mandating human review of AI outputs helps reduce professional risk and makes you a more attractive client for the insurance company. 

Next Steps

Alera Group works with professional service firms across industries to design Professional Liability Insurance programs that reflect how work is actually done today — including where AI is involved.

If you want to understand how your exposure is changing — and whether your current coverage keeps up — we’re here to help.

CONTACT AN ALERA GROUP PROFESSIONAL LIABILITY EXPERT