A small but growing number of cyber insurers are incorporating language into their policies that specifically addresses risks from artificial intelligence (AI). The June 2025 issue of The Betterley Report’s Cyber/Privacy Market Survey identifies at least three insurers that are incorporating specific definitions or terms for AI. This raises an important question for policyholders: Does including specific language for AI in a coverage grant (or exclusion) change the terms of coverage offered?

To be sure, at present few cyber policies expressly address AI. Most insurers appear to be maintaining a “wait and see” approach; they are monitoring the risks posed by AI, but they have not revised their policies. Nevertheless, a few insurers have sought to reassure customers that coverage is available for AI-related events. One insurer has gone so far as to state that its policy “provides affirmative cover for cyber attacks that utilize AI, ensuring that the business is covered for any of the losses associated with such attacks.” To the extent that AI is simply one vector for a data breach or other cyber incident that would otherwise be an insured event, however, it is unclear whether adding AI-specific language expands coverage. On the other side of the coin, some insurers have sought to limit exposure by incorporating exclusions for certain AI events.   

To assess the impact of these changes, it is critical to ask: What does artificial intelligence even mean?

This is a difficult question to answer. The field of AI is vast and constantly evolving. AI can curate social media feeds, recommend shows and products to consumers, generate email auto-responses, and more. Banks use AI to detect fraud. Driving apps use it to predict traffic. Search engines use it to rank and recommend search results. AI pervades daily life and extends far beyond the chatbots and other generative AI tools that have been the focus of recent news and popular attention.

At a more technical level, AI also encompasses numerous nesting and overlapping subfields.  One major subfield, machine learning, encompasses techniques ranging from linear regression to decision trees. It also includes neural networks, which, when layered together, can be used to power the subfield of deep learning. Deep learning, in turn, is used by the subfield of generative AI. And generative AI itself can take different forms, such as large language models, diffusion models, generative adversarial networks, and neural radiance fields.

That may be why most insurers have been reluctant to define artificial intelligence. A policy could name certain concrete examples of AI applications, but it would likely miss many others, and it would risk falling behind as AI was adapted for other uses. The policy could provide a technical definition, but that could be similarly underinclusive and inflexible. Even referring to subsets such as “generative AI” could run into similar issues, given the complex techniques and applications for the technology.

The risk, of course, is that by not clearly defining artificial intelligence, a policy that grants or excludes coverage for AI could have different coverage consequences than either the insurer or insured expected. Policyholders should pay particular attention to provisions purporting to exclude loss or liability from AI risks, and consider what technologies are in use that could offer a basis to deny coverage for the loss. We will watch with interest cyber insurers’ approach to AI — will most continue to omit references to AI, or will more insurers expressly address AI in their policies?

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This article was co-authored by Anna Hamel

A federal judge ordered two attorneys representing MyPillow CEO Mike Lindell in a Colorado defamation case to pay $3,000 each after they used artificial intelligence to prepare a court filing filled with a host of mistakes and citations of cases that didn’t exist.

Christopher Kachouroff and Jennifer DeMaster violated court rules when they filed the document in February filled with more than two dozen mistakes — including hallucinated cases, meaning fake cases made up by AI tools, Judge Nina Y. Wang of the U.S. District Court in Denver ruled Monday.

“Notwithstanding any suggestion to the contrary, this Court derives no joy from sanctioning attorneys who appear before it,” Wang wrote in her decision. “Indeed, federal courts rely upon the assistance of attorneys as officers of the court for the efficient and fair administration of justice.”

The use of AI by lawyers in court is not, itself illegal. But Wang found the lawyers violated a federal rule that requires lawyers to certify that claims they make in court are “well grounded” in the law. Turns out, fake cases don’t meet that bar.

Kachouroff and DeMaster didn’t respond to NPR’s request for comment.

The error-riddled court filing was part of a defamation case involving Lindell, the MyPillow creator, President Trump supporter and conspiracy theorist known for spreading lies about the 2020 election. Last month, Lindell lost this case being argued in front of Wang. He was ordered to pay Eric Coomer, a former employee of Denver-based Dominion Voting Systems, more than $2 million after claiming Coomer and Dominion used election equipment to flip votes to former President Joe Biden.

The financial sanctions, and reputational damage, for the two lawyers are a stark reminder for attorneys who, like many others, are increasingly using artificial intelligence in their work, according to Maura Grossman, a professor at the University of Waterloo’s David R. Cheriton School of Computer Science and an adjunct law professor at York University’s Osgoode Hall Law School.

Grossman said the $3,000 fines “in the scheme of things was reasonably light, given these were not unsophisticated lawyers who just really wouldn’t know better. The kind of errors that were made here … were egregious.”

There have been a host of high-profile cases where the use of generative AI has gone wrong for lawyers and others filing legal cases, Grossman said. It’s become a familiar trend in courtrooms across the country: Lawyers are sanctioned for submitting motions and other court filings filled with case citations that are not real and created by generative AI.

Damien Charlotin tracks court cases from across the world where generative AI produced hallucinated content and where a court or tribunal specifically levied warnings or other punishments. There are 206 cases identified as of Thursday — and that’s only since the spring, he told NPR. There were very few cases before April, he said, but for months since there have been cases “popping up every day.”

Charlotin’s database doesn’t cover every single case where there is a hallucination. But he said, “I suspect there are many, many, many more, but just a lot of courts and parties prefer not to address it because it’s very embarrassing for everyone involved.”

What went wrong in the MyPillow filing

The $3,000 fine for each attorney, Judge Wang wrote in her order this week, is “the least severe sanction adequate to deter and punish defense counsel in this instance.”

The judge wrote that the two attorneys didn’t provide any proper explanation of how these mistakes happened, “most egregiously, citation of cases that do not exist.”

Wang also said Kachouroff and DeMaster were not forthcoming when questioned about whether the motion was generated using artificial intelligence.

Kachouroff, in response, said in court documents that it was DeMaster who “mistakenly filed” a draft version of this filing rather than the right copy that was more carefully edited and didn’t include hallucinated cases.

But Wang wasn’t persuaded that the submission of the filing was an “inadvertent error.” In fact, she called out Kachouroff for not being honest when she questioned him.

“Not until this Court asked Mr. Kachouroff directly whether the Opposition was the product of generative artificial intelligence did Mr. Kachouroff admit that he did, in fact, use generative artificial intelligence,” Wang wrote.

Grossman advised other lawyers who find themselves in the same position as Kachouroff to not attempt to cover it up, and fess up to the judge as soon as possible.

“You are likely to get a harsher penalty if you don’t come clean,” she said.

An illustration picture shows ChatGPT artificial intelligence software, which generates human-like conversation, in February 2023 in Lierde, Belgium. Experts say AI can be incredibly useful for lawyers — they just have to verify their work.

Nicolas Maeterlinck/BELGA MAG/AFP via Getty Images

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Nicolas Maeterlinck/BELGA MAG/AFP via Getty Images

Trust and verify

Charlotin has found three main issues when lawyers, or others, use AI to file court documents: The first are the fake cases created, or hallucinated, by AI chatbots.

The second is AI creates a fake quote from a real case.

The third is harder to spot, he said. That’s when the citation and case name are correct but the legal argument being cited is not actually supported by the case that is sourced, Charlotin said.

This case involving the MyPillow lawyers is just a microcosm of the growing dilemma of how courts and lawyers can strike the balance between welcoming life-changing technology and using it responsibly in court. The use of AI is growing faster than authorities can make guardrails around its use.

It’s even being used to present evidence in court, Grossman said, and to provide victim impact statements.

Earlier this year, a judge on a New York state appeals court was furious after a plaintiff, representing himself, tried to use a younger, more handsome AI-generated avatar to argue his case for him, CNN reported. That was swiftly shut down.

Despite the cautionary tales that make headlines, both Grossman and Charlotin view AI as an incredibly useful tool for lawyers and one they predict will be used in court more, not less.

Rules over how best to use AI differ from one jurisdiction to the next. Judges have created their own standards, requiring lawyers and those representing themselves in court to submit AI disclosures when it’s been used. In a few instances judges in North Carolina, Ohio, Illinois and Montana have established various prohibitions on the use of AI in their courtrooms, according to a database created by the law firm Ropes & Gray.

The American Bar Association, the national representative of the legal profession, issued its first ethical guidance on the use of AI last year. The organization warned that because these tools “are subject to mistakes, lawyers’ uncritical reliance on content created by a [generative artificial intelligence] tool can result in inaccurate legal advice to clients or misleading representations to courts and third parties.”

It continued, “Therefore, a lawyer’s reliance on, or submission of, a GAI tool’s output—without an appropriate degree of independent verification or review of its output—could violate the duty to provide competent representation …”

The Advisory Committee on Evidence Rules, the group responsible for studying and recommending changes to the national rules of evidence for federal courts, has been slow to act and is still working on amendments for the use of AI for evidence.

In the meantime, Grossman has this suggestion for anyone who uses AI: “Trust nothing, verify everything.”