Managing Legal and Insurance Risks When Using AI in Hiring

Employers are adopting artificial intelligence to streamline hiring, but as Business Insurance’s Claire Wilkinson reports, this efficiency comes with heightened legal, regulatory, and coverage risks. Experts emphasize that despite the promise of AI screening tools, discrimination laws such as Title VII, the ADA, and the ADEA remain fully applicable. Joni Mason of USI Insurance Services and Jon Janes of Woodruff Sawyer warn that even neutral algorithms can have a disparate impact on protected groups when using AI in hiring, exposing employers to litigation.

Recent lawsuits—including Mobley v. Workday Inc. and a federal case against Sirius XM—illustrate how bias in AI systems can give rise to discrimination claims. Attorney Sara Jodka of Dickinson Wright notes that while most suits target technology vendors, employers remain responsible for their hiring outcomes under emerging state and local laws. New York City and California now mandate audits and data retention for automated decision tools, with California’s updated regulations holding employers directly accountable for AI-related discrimination.

Employment practices liability (EPL) coverage generally extends to AI-related claims, according to Mary Anne Mullin of QBE North America and Kelly Thoerig of Lockton. However, insurers are increasing scrutiny of AI use, and QBE’s August survey found that over half of respondents expect AI-related HR claims in the coming year. Risk professionals like Will Lehman of Cook Group stress the need for ongoing governance: regular audits, cross-functional oversight, and human review in final hiring decisions.

For risk managers, the adoption of AI in hiring requires rigorous oversight, transparent vendor practices, and consistent system audits to mitigate exposure to discrimination and maintain insurability.