Why Captives Should Prepare For AI Liability Risks
Artificial intelligence is no longer an experiment. From customer service to medical diagnostics, companies are embedding AI into core operations. But as adoption accelerates, so do the risks, and accountability for AI failures is far from clear.
In a recent article published by Insurance Newsnet, Randy Sadler of CIC Services explains how Recent lawsuits show the stakes are real. In 2024, a federal judge allowed a class-action case against Workday’s hiring software to proceed, alleging the system rejected applicants based on age, race, and disability. The Equal Employment Opportunity Commission weighed in, clarifying that employers — not the technology vendors — usually bear responsibility. The message is clear: when AI goes wrong, it’s the business deploying the tool that shoulders the fallout.
This is where captives come in. Traditional insurance often excludes or limits coverage for emerging AI risks, but captives can be tailored to fill the gap. They can fund defense costs, settlements, regulatory response, and even losses tied to third-party AI vendors. For businesses already relying on captives, AI liability is a natural next frontier.
Captive owners should start by identifying where AI is in use, mapping points of legal exposure, and modeling worst-case outcomes. From there, captives can be structured to include AI liability policies or reserves that evolve alongside the technology.
Read the full article here to see why AI liability can’t be ignored. If your business is deploying AI and you’re unsure how the risks stack up, it’s time to consider a smarter, more strategic insurance model. Rethink your coverage—before the algorithms make the mistakes for you.