AI is evolving fast, and so are the D&O implications. Is your coverage keeping up? Catch up on the latest AI-related D&O developments – and make sure you have the coverage you need for today’s risks.
AI Exposures Go Way Beyond the Tech Sector
AI-related D&O exposures are a big deal for tech companies, but they’re also important for companies in all sectors. In 2025, 88% of companies report using AI and 79% of companies report using generative AI, according to McKinsey & Company.
The Bipartisan Policy Center shows that firms in a wide range of industries have adopted AI, including 18.1% of firms in the information sector, 12% of firms in the professional, scientific and technical sector, 9.1% of firms in the educational services sector, and 8% of the real estate, rental and leasing sector.
Regardless of the industry, accurate disclosure is key. According to Insurance Business, U.S. regulators and plaintiff’s firms have been focusing on AI disclosures, or a lack thereof, in filings and earning calls. AI claims in marketing and product documentation have also drawn scrutiny. Claims stemming from under-promising or over-promising AI capabilities are a growing threat, so insurers are paying close attention.
AI Regulation Is Growing
The National Conference of State Legislatures (NCSL) reports that all 50 states, Puerto Rico, the Virgin Islands, and Washington, D.C., have introduced legislation related to AI this year. Thirty-eight states adopted or enacted roughly 100 measures this year, making it tough for businesses to stay on top of evolving rules.
Workers Are Secretly Using AI
Many of the risks stemming from generative AI are fairly well known at this point, including data security and hallucination exposures. To control these risks, some employers have created policies to restrict AI usage – but employees don’t always follow these rules.
According to a survey from Gusto, a company that provides HR software, 45% of employees have used AI at work without telling their manager. Tech workers and Gen Z workers are the most likely to use AI in secret.
As companies try to rein in their AI risks and ensure accurate disclosures, secret AI usage can add complications.
AI Investments Are Booming – But for How Long?
According to research from IDC, global enterprises are expected to invest $307 billion in AI solutions in 2025, and that figure could rise to $632 billion by 2028.
For AI companies, this is an exciting time. Fortune says there are already at least 498 AI “unicorns” and with a total value of roughly $2.7 trillion.
However, the outlook isn’t entirely rosy. Companies are betting big on generative AI, but so far, it’s not always paying off. In fact, according to The GenAI Divide State of AI in Business 2025 report from MIT NANDA, despite investing $30 to $40 billion into AI, 95% of companies have seen no return yet.
Many analysts believe we’re in an AI bubble, and it’s only a matter of time before it bursts. It’s not just AI detractors, either. According to Yahoo Finance, even Sam Altman, the CEO of OpenAI, has warned that investors are “overexcited.”
When the hype dies down, some investors may lose money. The question is, how bad will it be? Some companies may fail, and many others will likely see falling valuations. In both scenarios, D&O lawsuits are likely.
It’s Not Only About You
In addition to being sued for their own AI-related actions, some companies are now being sued for underestimating or failing to adequately respond to AI repercussions within their competitive environment.
For instance, Reddit is facing a class action lawsuit alleging that the company failed to disclose how changes in the Google Search algorithm and rollout of features like AI Overview impacted its site traffic and ad results.
AI Policy Exclusions Are the New Normal
As AI-related exposures proliferate, don’t assume your current insurance will always protect you. Insurers are trying to control their AI risks, as well, and some are introducing AI exclusions. If your D&O or other management liability policy contains one of these AI exclusions, you may not have any coverage at all for a lawsuit stemming from your company’s use of AI. This is a concern for both tech and non-tech companies.
Can Your D&O Coverage Handle AI Exposures?
D&O Diary says there have been 50 Securities Class Actions complaints that involve AI in some way as of August 1, 2025, including complaints against AI companies as well as complaints against other companies that reference AI.
If predictions about an AI bubble are correct – and even if they’re not – more litigation may lie ahead. The AI landscape is changing fast, and if your D&O coverage isn’t keeping up, you could pay the price down the road.
NSI Insurance Group can help you assess your coverage in light of current trends and emerging risks. Contact NSI for a review of your D&O coverage.
