Artificial intelligence has become part of the everyday: rapidly moving from an experimental tool to become a day-to-day business resource.
But companies are being warned that responsibility does not disappear when a decision is made by software, particularly when employees may be using technology unofficially.
As organisations increasingly use AI for recruitment, customer management, financial decisions and operational processes, questions are emerging about who is responsible when the technology gets something wrong – and whether existing insurance policies will provide protection.
A recent legal challenge in California involving AI-powered recruitment software has highlighted some of the potential risks. A job applicant who claimed they had repeatedly been rejected for roles because of discriminatory algorithmic decisions on a recruitment platform took action against the software provider, raising wider questions about whether liability sits with the technology developer, the business using the system, or both.
While the case relates to the US, it carries a wider warning for businesses: using AI does not necessarily mean outsourcing accountability. Employers may still face claims, even when the discriminatory outcomes are produced by automated systems outside their control, while the technology providers themselves may also come under scrutiny.
If a business is using AI to support decisions that affect employees, customers or suppliers, it still needs to understand how those decisions are being made and what safeguards are in place. It makes understanding, testing and monitoring AI tools increasingly important.
A further area requiring close attention is the potential impact on insurance cover. Many businesses may assume that existing professional indemnity, management liability or technology policies will cover them if AI creates a problem. However, insurers are increasingly reviewing their approach to AI-related claims, with some introducing exclusions, limits or specific conditions around artificial intelligence risks.
For smaller businesses in particular, the risk may be greatest where AI tools have been adopted quickly, often through individual teams or employees, without a wider review of how they are being used.
AI can deliver significant benefits, but it needs the same level of oversight as any other business process. Businesses should be continually checking what systems are being used, what information is being processed, whether human checks remain in place and whether their insurance arrangements reflect their actual exposure.
The technology may be new, but the underlying principle is familiar: businesses are responsible for the decisions made.
Practical steps businesses should consider include reviewing AI usage across the organisation, checking supplier terms and contracts, understanding what data is being accessed by AI tools, and speaking to insurers about AI-related risks.
Quick check:
– Where is AI currently being used in the business?
– Who approved its use?
– What human oversight exists?
– Do supplier contracts protect us if the tool fails?
– Does our insurance cover AI-related losses?
Mobley, et al. v. Workday, Inc., No. 23-CV-00770 (N.D. Cal. June 22, 2026) (ECF No. 360)
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*This is not legal advice; it is intended to provide information of general interest about current legal issues.
