Artificial intelligence (AI) will likely have a profound impact on the liability exposure of directors and officers in future years, similar to AI’s enormous impact on businesses and society in general. Virtually every company is being impacted, and will continue to be impacted, in unprecedented and transformative ways both internally and externally by AI. That environment creates significant new demands on directors and officers to manage their company’s rapidly changing AI-related opportunities and risks and properly disclose AI-related information to investors, regulators and other constituents. D&O litigation which challenges AI decisions by directors and officers will likely become rampant and expensive to defend and resolve.
History has repeatedly shown that this type of incredible business evolution produces not only some wildly successful companies, but also many disappointing or failed companies which become targets of expensive D&O claims. The number of companies potentially impacted by AI risks and thus exposed to AI-related D&O claims is very large and growing. According to a 2025 report by The Conference Board, 72% of S&P 500 companies disclosed in public filings at least one material AI risk in 2025, up from 12% in 2023. These increased risk disclosures were most prominent in the financial, healthcare, industrial, IT and consumer-facing sectors. The identified risks primarily involve reputational, cybersecurity and regulatory concerns. When AI impacts that many companies, the likelihood of D&O claims seems inevitable. Although the legal theories underlying those claims will probably not be new, the frequency and severity of those claims may be alarming for companies in virtually any industry.
The following discussion summarizes the likely types of AI-related D&O claims, some sample D&O risk management strategies, and possible responses to these exposures by D&O insurance underwriters.
A. Types of AI-related D&O Claims
Like D&O claims in other contexts, AI-related D&O claims will most likely consist primarily of securities class actions (which focus on the company’s AI-related disclosures) and shareholder derivative suits (which focus on AI-related management decisions). Both of those types of claims are addressed below.
  1. Securities Claims
AI-related securities class actions will likely be the most common type of AI-related D&O claims. Investors currently appear to have “irrational exuberance” for AI-related companies, much like the .com bubble in the late 1990s for internet-related companies. As large numbers of investors become disappointed in their AI-related investments, significant securities class action claims against D&Os will likely occur.
These securities class actions will most likely focus on several types of alleged wrongdoing, including:
- A company overstating or exaggerating its AI capabilities or its ability to successfully commercialize those capabilities (i.e., “AI-washing”).
- A company failing to fully disclose the material risks associated with its AI strategies and business, including risks from competitors, changing technology, rapid industry evolution, claims by customers, and claims involving the company’s huge AI-related capital expenditures.
- A company failing to disclose its use and reliance on AI in connection with its material processes and operations.
- A company failing to disclose the indirect effect of the use of AI by its customers and trading partners (e.g., by using AI, customers can make more informed purchasing decisions, which can force lower profit margins for the company in order to remain competitive).
- A company attributing internal business decisions (such as workforce reductions or restructurings) to AI in order to cover up non-AI financial or operational issues.
AI-related securities lawsuits against companies and their directors and officers are already being filed, albeit in limited numbers so far. For example, seventeen AI-related securities class actions were filed in 2025, which is about double the number of such cases in 2023. Most of these lawsuits allege the defendants overstated the use or effectiveness of AI technology in their business, and target a wide variety of companies, including Upstart (an AI lending platform), Zillow (developer of the Zillow Offers AI tool which provides predictive pricing information for buyers and sellers of houses), Innodata (an AI-enabled software platform company), Evolv Technologies Holdings (developer of AI-based weapons detection products for security screenings), UiPath (robotic process automation tool manufacturer with supplemental AI-powered products), Oddity Tech Ltd. (cosmetics internet platform which purportedly uses AI-based technologies to target consumer needs), and GitLab (an AI developer).
In the first half of 2026, 18 AI-related securities class actions were filed, including cases against high-tech giants Microsoft and Oracle. When annualized, this pace is again about double the number in the prior year. In the AI-related securities class actions filed in 2024 and 2025, courts granted motions to dismiss in whole or in part in 12 cases, and denied motions to dismiss in only two. Those dismissals were based on common securities litigation defenses, such as failure to adequately allege scienter or materially false statements (as opposed to mere puffery or opinions).
  2. Shareholder Derivative Lawsuits
AI-related shareholder derivative lawsuits against directors and officers have been less common to date. These lawsuits allege breach of the defendants’ fiduciary duties in connection with AI matters, such as failure to properly oversee the company’s AI risks or the failure to properly use AI in the board’s operations. A 2025 Pricewaterhouse Coopers directors survey revealed that 35% of the respondents said their boards have incorporated AI into the board’s exercise of its oversight responsibilities. Injecting these untested and new resources into a company’s governance and operational infrastructure will inevitably result in unexpected and potentially harmful consequences, which can lead to mismanagement claims against directors and officers.
Examples of this type of mismanagement claim may include:
- Directors or officers may rely on AI in making a business decision that is harmful to the company, prompting shareholder allegations that such reliance was unreasonable without further investigation into the reliability, capability and accuracy of the AI systems used.
- Directors or officers may fail to use commonly accepted and uniquely applicable AI systems to assist in their decision process, resulting in less informed decisions when compared with other companies under similar circumstances.
- Directors and officers may authorize an expensive, resource-intensive but ineffective strategy to implement, use or market AI, resulting in significant long-term losses and jeopardizing the company’s financial health and reputation.
- Directors and officers may implement inadequate internal controls regarding AI issues resulting in significant claims against the company, including intellectual property infringement, invasion of privacy, defamation and similar tort claims.
- Directors and officers may fail to identify or respond to company risks created by advisors, vendors, suppliers or competitors using (or misusing) AI technology.
- Directors and officers may fail to stay abreast of rapidly changing AI technologies or recognized AI best practices.
- Directors and officers may knowingly or recklessly train its AI tools using copyrighted or other legally protected intellectual property.
  3. SEC Claims
In addition, the SEC has been clear that it intends to carefully monitor AI-related disclosures by companies, using existing and well-recognized securities law concepts such as (i) are the AI-related disclosures accurate and complete; (ii) does the company have a reasonable basis to make the AI-related assertions; and (iii) are the material AI-related risks fully disclosed. This oversight has already resulted in several enforcement actions against companies and their executives for misrepresenting AI-related matters, including the April 2025 indictment and parallel SEC lawsuit against the founder and CEO of Nate, Inc. for raising $42 million from investors by misrepresenting the company’s app used AI technology to complete online shopping purchases when in fact the purchases were completed manually by overseas workers.
  4. AI Specific Laws
Numerous states have enacted or are proposing laws regulating AI in numerous contexts, including the use of AI in various commercial settings, in employment and HR matters, in media and other consumer-focused content, and in healthcare. These laws prohibit or seek to mitigate, for example, unfair business practices, biased decision making, false or misleading digital replicas, deceptive content, and unauthorized use of data. There is little consistency among these state laws, resulting in a challenging patchwork of regulations for companies operating in multiple states. The Trump administration is proposing a uniform set of federal AI regulations which would preempt the many state laws and would impose relatively minimal prohibitions.
Although these laws primarily regulate company behavior, it seems likely the laws will be used either directly or indirectly to fuel D&O claims related to AI matters.
  5. Other Types of Claims
A myriad of other types of AI-related claims will likely be filed with varying degrees of frequency. Examples include intellectual property infringement claims alleging the AI algorithms used third party protected information; employment claims alleging wrongful termination or misrepresentations in connection with a company’s downsizing or reconfiguration of its workforce cause by AI; cybersecurity claims related to deepfake scams; privacy claims arising from use of AI; discrimination claims based on algorithmic bias; antitrust claims alleging price fixing and collusion based on AI algorithms and data sharing; and claims by state regulators under newly enacted state AI regulations.
B. D&O Risk Management
To address AI-related concerns and exposures, directors and officers should be very proactive in understanding and responding to AI-related risks and opportunities. For example, directors should regularly consider basic AI-related questions such as which senior executive focuses on AI issues; how is AI used within the company; what restrictions should apply to individual directors’ use of AI in connection with the board service; how are AI risks and opportunities identified, evaluated and monitored; what policies and ethical guidelines should be adopted related to AI; how are competitors using AI; what are reasonable or necessary levels of investment by the company in AI development and use; should one or more directors with AI expertise be added to the board; and how can the board best stay informed regarding this complex and rapidly changing topic?
Many companies are now adopting policies to address their internal and external uses of AI. These policies often address, among other things, managing data, checking AI models, testing for bias, protecting privacy, assuring IP compliance, conducting training, and requiring documentation. Frequent review and updating of these policies are essential.
A 2025 survey report by Pricewaterhouse Coopers revealed that 57% of director respondents said their full board had primary oversight of AI issues and only 17% said a board committee had that responsibility. In any event, the full board should decide who within the company has what responsibility regarding AI uses, strategies and oversight.
C. D&O Underwriting Response to AI Exposures
In light of the extent and breadth of AI’s impact on so many companies, D&O insurance underwriters must now decide how they can best anticipate and manage those exposures. Companies understandably are insisting on quality D&O insurance protection for their AI risks, and the D&O insurance market is sufficiently competitive today to afford that quality coverage. So, an AI exclusion is not an option in most instances, although a few sample broad-form AI exclusions for D&O policies are beginning to be filed with regulators or circulated in the market. Not surprisingly, those sample exclusions vary significantly among D&O insurers (including whether the exclusion applies to Side A coverage) and are materially different than the ISO CGL AI exclusion applicable to generative AI. Absent such an exclusion, underwriters must carefully balance the need to afford meaningful AI-related D&O coverage with the need to prudently underwrite that coverage.
Like any underwriting analysis, decisions related to AI coverage should be informed and should reflect the insured company’s unique AI characteristics. Some of that information is easily identifiable. For example, in what industry sector does the company operate; what public disclosures have the company made about its AI risks, opportunities, strategies and policies; is the company subject to state AI regulation; and what if any AI-related claims or incidents have been disclosed by the company?
Equally important, but more difficult to obtain, is information about the company’s internal AI uses, policies, procedures, governance/oversight structure, strategic plans and risks assessment. In an attempt to obtain some of that information, underwriters could use a special AI-specific questionnaire in the underwriting process or ask AI-specific questions in an underwriting meeting with one or more senior company executives following advanced notice of those questions so the executives can be prepared for the discussion.
If underwriters are unable to obtain sufficient AI information about a company, many D&O underwriters will most likely choose to insure the company anyway. But, several features of the coverage could potentially be adjusted depending on the underwriters’ level of concern
regarding AI exposures, if market conditions permit. For example, the D&O policy’s limit of liability could be reduced or the deductible could be increased; the attachment point (if the coverage is excess) could be increased; and co-insurance could be added for the Side B and Side C coverages. At a minimum, the premium for the policy could reflect the underwriters’ heightened concerns.
D. Summary
The widespread use of AI today presents unprecedented opportunities and challenges for companies, their directors and officers, and D&O insurance underwriters. It is impossible to accurately predict the full impact of AI on companies and D&O litigation, but that impact is likely to be enormous on virtually all aspects of most companies’ operations, financial performance and internal governance. As a result, important decisions must be made with inadequate knowledge and information. But, companies and insurers who recognize AI’s growing importance and who seek to prudently react to this new environment will have a better chance of successfully navigating these uncertainties.