Scenario Library / Hallucination liability
Hallucination liability

Customer-service chatbot gives wrong advice or an improper promise, and the customer sues

A company's AI customer-service chatbot gives wrong advice or makes a promise the company would not make. The customer suffers a financial loss and sues, and courts have held that a company is responsible for what its chatbot says.

Cross-industry Not dated Hypothetical; built from a precedent

Insurance products that may respond

Tech E&OStandalone AI liabilityMisc. professional liability

Why it matters for insurance

Real-world precedent is Moffatt v. Air Canada (H-01). The blog frames this as a core AI error exposure for any company with a customer-facing bot. Market note (Ryan Specialty): some carriers exclude AI on E&O or D&O quotes and others stay silent, so check each policy's wording.

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This is an educational research summary built from public information. Allegations in pending cases are unproven, and the insurance notes above are for discussion, not coverage advice. Whether any policy responds depends on its specific wording, exclusions, endorsements, the facts, and applicable law.

Reviewed by Andrei Craciunescu, CA Licensed Insurance Broker #4467994