Introduction: The AI Assistant Joins the Team # When your employee makes a mistake, your company often shares liability. But what happens when an AI assistant makes a mistake? As enterprises increasingly deploy conversational AI tools like Anthropic’s Claude, OpenAI’s ChatGPT Enterprise, Google’s Gemini, and Microsoft’s Copilot, they’re discovering that liability questions are more complex, and more consequential, than they anticipated.
An Emerging Crisis # Professional liability insurance makes modern professional practice possible. Doctors, lawyers, engineers, and accountants can take on complex work because insurance spreads the risk of error across the profession. The insurance industry has spent decades developing actuarial models to price this risk accurately.
Architecture and engineering stand at the frontier of AI transformation. Generative design algorithms now propose thousands of structural options in minutes. Machine learning analyzes stress patterns that would take human engineers weeks to evaluate. Building information modeling systems automate coordination between disciplines. AI code compliance tools promise to catch violations before construction begins.
AI Therapy Apps: A $2 Billion Industry Without a License # AI mental health apps have become a multi-billion dollar industry serving millions of users seeking affordable, accessible psychological support. Apps like Woebot, Wysa, Youper, and others promise “AI therapy” using cognitive behavioral therapy techniques, mood tracking, and conversational interfaces. The market is projected to reach $7.5-7.9 billion by 2034, with North America commanding 57% market share.
Beyond Sanctions: The Malpractice Dimension of AI Hallucinations # Court sanctions for AI-generated fake citations have dominated headlines since Mata v. Avianca. But sanctions are only the visible tip of a much larger iceberg. The deeper exposure lies in professional malpractice liability, claims by clients whose cases were harmed by AI-generated errors that their attorneys failed to catch.
The AI Insurance Crisis: Uninsurable Risk? # The insurance industry faces an unprecedented challenge: how to price and cover risks from technology that even its creators cannot fully predict. As AI systems generate outputs that cause real-world harm, defamatory hallucinations, copyright infringement, discriminatory decisions, even deaths, insurers are confronting a fundamental question: can AI risks be insured at all?
The Insurance Industry’s AI Reckoning # The insurance industry faces an unprecedented challenge: how to underwrite risks from technology that even its creators don’t fully understand. As AI systems increasingly make decisions that traditionally required human judgment, and increasingly cause harm when those decisions go wrong, insurers are scrambling to adapt products designed for a pre-AI world.
Key Takeaways Most professionals don’t know if their malpractice insurance covers AI-related claims, and increasingly, it doesn’t Major carriers (AIG, Berkley, Hamilton) are actively rolling out AI exclusions Verisk’s 2026 standardized exclusions could reshape market-wide coverage overnight New AI-specific policies are emerging (like Armilla’s Lloyd’s-backed coverage), but adoption is limited Action required: Ask your carrier directly about AI coverage before renewal, don’t assume The Growing AI Coverage Gap # Professional liability insurance was designed for a world where humans made decisions and mistakes. As AI tools increasingly participate in professional services, from legal research to medical diagnosis to financial advice, a dangerous gap is emerging between the risks professionals face and the coverage they assume they have.