Law firms risk claims without safeguards for generative AI

This article was originally published in Legal Futures, August 2023.

Law firms must either introduce “safeguards that include human oversight” to authenticate AI-generated content or “expect an increased exposure” to negligence claims, a leading law firm has warned.

In its outlook for professional liability claims, Kennedys also described 2023 as “a year for claims by disappointed beneficiaries”, as difficulties in taking instructions during lockdown triggered a “disproportionately high number of notifications” to professional indemnity (PI) insurers”.

Kennedys said the advent of generative AI had “the potential to transform the legal sector by increasing efficiency and reducing costs”, but these benefits introduced “significant risks to the profession” too, particularly whilst AI tools remained in their infancy.

“Those risks are magnified when lawyers seek to rely upon open AI platforms that have extracted data from multiple unverified sources.

“Firms that fail to introduce appropriate safeguards that include human oversight to authenticate the AI-generated content can expect an increased exposure to PI claims.”

Separately, the pandemic had led to a “steep rise” in the number of wills being made, and the “inherent difficulties in taking instructions during lockdown” led to “a disproportionately high number of notifications to PI insurers”.

Against the backdrop of a cost-of-living crisis, beneficiaries were “more prepared to enter into disputes with their advisers (and each other)”.

Kennedys said post-pandemic working had also created the “perfect storm” for “pure process error claims” against law firms.

“Junior lawyers (particularly at smaller firms) are exposed to increasing workloads and pressure to meet financial targets, whilst receiving less supervision due to hybrid working patterns.

“This has led to more claims arising from missed court deadlines, delays in registering documents and failure to progress cases and transactions.”

On environmental, social and governance (ESG) issues, lawyers should “expect to face claims for breach of the duty to warn their clients about potential climate risks, for example, in property transactions where there is a risk of flooding”.

Kennedys said it was also expecting claims would be brought against lawyers advising clients on achieving B Corp status (a certification for companies aiming to achieve high ESG performance) and those advising on corporate governance issues, such as drafting money laundering, bribery and corruption and diversity and inclusion policies.

Law firms involved in conveyancing remained “particularly susceptible to cyber attacks” such as phishing and business email compromise.

“The risk of either the client or the professional falling victim to these types of attacks typically peaks when pressure on time and resource for completions is high, with the pressure often resulting in the breakdown of organisational controls, including confirmation of bank details or scrutiny of suspicious emails.

“Unfortunately, the risk of complex cyber attacks such as ransomware also remains, with increasingly common remote working practices meaning that computer environments and their perimeters cannot be as closely monitored, whilst any lack of multi-factor-authentication facilitates a significantly increased risk.”

On strategic lawsuits against public participation (SLAPPs), Kennedys said media and defamation lawyers were “in the invidious position” of balancing their clients’ need for speed in blocking publication with the risk of being reported to the Solicitors Regulation Authority for bringing a SLAPP.

Related item: Professional liability report 2023: trends and future risks

Read other items in Professions and Financial Lines Brief - November 2023

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