Hunton Insurance Recovery Blog

Artificial intelligence (AI) is en vogue. As it rapidly reshapes industries, companies are racing to integrate and market AI-driven solutions and products. But how much is too much? Some companies are finding out the hard way.

The legal risks associated with AI, especially those facing corporate leadership, are growing as quickly as the technology itself. As we explained in a recent post, directors and officers risk personal liability, both for disclosing and failing to disclose how their businesses are using AI. Two recent securities class action lawsuits illustrate the risks associated with AI-related misrepresentations, underscoring the need for management to have a clear and accurate understanding of how the business is using AI and the importance of ensuring adequate insurance coverage for AI-related liabilities.

Directors and officers should take note of a recent decision from the US Bankruptcy Court for the Southern District of New York concerning access to D&O insurance policy proceeds.  In In re SVB Financial Group, Case No. 23-10367 (Bankr. S.D.N.Y. May 22, 2023)^[1], the Bankruptcy Court found cause to lift the automatic stay to allow directors and officers to access the proceeds of SVB Financial Group’s (“SVB”) directors and officers (“D&O”) insurance policies to pay for legal costs incurred in responding to investigations and defending litigation.  Moreover, it declined to impose a “soft cap” on the advance of defense costs. 

Partner Geoffrey Fehling, who leads the firm’s Boston insurance coverage practice, has been appointed to co-chair the Director and Officer Liability Committee of the American Bar Association’s Business Law Section. The Committee is part of the ABA Business Law Section’s global network of over 30,000 business law professionals interested in expanding their knowledge, engaging with their professional communities, and advancing their experience through Section committees, programs, and meetings.