D&O, E&O and CGL policies not built for AI risks: Coverage gaps mean AI failure lands on the balance sheet — sharpening the prevention case.
In regulated industries such as healthcare, insurance, and financial services in Canada and the UK, artificial intelligence (AI) failure can have serious consequences. Traditional liability policies, including Directors and Officers (D&O), Errors and Omissions (E&O), and Commercial General Liability (CGL) policies, were designed to cover human actions, not AI systems. As a result, these policies often leave organisations with significant gaps in coverage when their AI solutions fail.
Organisations that deploy AI must understand the risks associated with this technology. One risk is capability risk: does the AI system do what was promised? A second is governance risk: can the decision be defended when boards or regulators ask questions about the system’s performance? Finally, there is liability risk: what is the organisation accountable for when the AI system errs?
Organisations must take action now to address these risks. In response to the development of AI in healthcare and other regulated sectors, prudent organisations should conduct thorough assessments of their AI systems before deploying them. This includes testing the technology against real-world operations, assessing its impact on people and governance structures, and evaluating its legal and regulatory exposure. A strategic step is for organisations to engage independent experts who can examine these factors and provide a plain verdict: proceed, proceed with conditions, or do not.
Straven & Co examines AI decisions before they are acted on, helping organisations avoid costly mistakes. By conducting thorough assessments of the system’s capability, governance, and liability risks, Straven provides an unbiased view of AI solutions in healthcare and other regulated sectors.