Revolutionary AI Chatbot ChatGPT Poses New Threats to Directors and Officers' Liability

May 03, 2024

Artificial Intelligence is not a new concept, but in early 2023, ChatGPT, a cutting-edge AI tool, took the world by storm. It wowed the customers and inspired heated back-and-forths.

On the one hand, the growth of this popular AI tool is propelling the AI market to new heights as more businesses look to adopt AI technology to increase efficiency and improve customer engagement. Microsoft has pledged a “multi-year,” “multi-billion dollar” investment in ChatGPT and plans to integrate it into Bing. Google and Alphabet Inc. have also announced that they will be adopting its conversational AI service called Bard. Baidu, Inc., a Chinese web giant, has also announced its plans to launch its own Chatbot. This has created a thriving market for investors seeking to capitalize on AI technology and a chance for AI-related companies to grow.

Coming with the opportunities, on the other hand, directors and officers (D&O) of those AI-related companies are facing new challenges. There are two groups of D&O that need to manage these risks: those from AI technology companies and those from companies that have adopted AI in their operations.

Typically, D&Os have a duty to act in the best interests of the company and its shareholders while ensuring that the company operates within the boundaries of relevant laws and regulations. They are responsible for risk management, strategic planning, corporate governance, and financial responsibility and must maintain high ethical standards and avoid conflicts of interest.

However, the integration of AI technology into business operations can pose challenges for D&Os and their liabilities in several ways:

  1. Compliance with laws and regulations: The use of AI may raise legal and regulatory issues, such as data privacy, discrimination, and algorithmic bias. D&Os must ensure that the company’s use of AI is in compliance with all relevant laws and regulations across all its locations.
  2. Risk management: AI systems may present new risks, such as cybersecurity threats and the risk of algorithmic errors. For instance, if the company fails to implement and control adequate security measures, a hacking attack could occur, causing financial loss and damage to the company’s reputation and potentially resulting in lawsuits or investigations targeting D&Os.
  3. Ethical behavior: The use of AI raises ethical questions, such as fairness, transparency, and accountability. D&Os must ensure that the company’s use of AI aligns with ethical standards and company values.
  4. Financial responsibility: The cost of acquiring and maintaining AI systems can be substantial. D&Os must ensure that the company’s investment in AI is sound and aligned with its financial goals.
  5. Liability: D&Os may be held liable for harm caused by AI systems, such as discrimination or algorithmic bias. They must ensure that the company’s use of AI is responsible and in line with its values and goals.

These risks underscore the importance of careful planning and effective risk management for both AI technology companies and businesses that have adopted AI in their operations. D&Os are wise to seek customized coverage to avoid potential legal and financial consequences.

Our solution advises:

  • D&O Liability Insurance

  • Error & Emissions

  • Cyber Insurance

  • Employment Practices Liability Insurance

Still in doubt?

Ask our expert to learn more risk management tips.




  1. AI: Insurance, business and liability considerations | PropertyCasualty360
  2. ChatGPT – legal challenges, legal opportunities
  3. TTE’s Inaugural Ethical Tech Report
  4. Artificial Intelligence – What does an AI failure mean for directors and their insurers | Artificial
  5. Bard, Bing and Baidu: how big tech’s AI race will transform search – and all of computing
  6. The way we search for information online is about to change | CNN Business
  7. What is Google’s Bard and how is it different to ChatGPT?
  8. Microsoft looks ready to go all-in on OpenAI. Should Google start worrying?
  9. ‘Google killer’ ChatGPT sparks AI chatbot race