General Liability in the Digital Age: 5 Technologies That Are Creating New Business Risk

General Liability in the Digital Age: 5 Technologies That Are Creating New Business Risk

From drones and 3-D printing to artificial intelligence and autonomous vehicles, disruptive advancements in technology are everywhere – and they’re rapidly changing traditional business models across industries. While these trends may help improve efficiency, safety, and service, their increasing adoption also introduces new liability risks for the businesses that choose to incorporate them.

Read on to learn about five key technologies that are currently influencing the liability insurance landscape – and how they may impact risk management strategies going forward.

1. Drones

The use of commercial drones is a game-changer for industries ranging from construction to warehousing. But companies that deploy drones must stay abreast of a host of safety practices, compliance regulations, and privacy guidelines – all of which are still developing.

Companies that deploy drones must stay abreast of a host of safety practices, compliance regulations, and privacy guidelines – all of which are still developing.

With the ability to take cameras over property lines, for example, drones bring the risk of privacy violations, including advertising liability if they capture third-party images. At the same time, liability also increases if operator error or flight accidents end up causing property damage or bodily injury.

To protect against these emerging risks, enhancements to commercial general liability policies or separate aviation policies can be a strong line of defense as your company maps out its drone strategy.

2. 3-D Printing

The impact of 3-D printing is altering everything from manufacturing processes to pharmaceutical production. And given the technology’s rapid evolution and acceptance, the range of 3-D printed products and applications is expanding quickly.

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The benefits to businesses are obvious: shorter product-development cycles; cheaper market-entry costs; and better competitive customization are just a few. Along with these advantages, however, come changes in liability exposure. Using 3-D printing to manufacture goods, for instance, could trigger a rise in claims stemming from worker and third-party injuries, property damage, intellectual property infringement, product liability, and cyber liability (for design and data theft).

Bottom line? The extent of business liability risk will ultimately depend on what’s being produced, how deeply 3-D printing technology is involved in producing it, and what roles various parties have in the process.

3. Self-driving Vehicles

Self-driving technology is on the verge of permanently altering the face of the automotive industry, with major business-model changes already underway at ride-sharing providers, company fleets, and trucking companies. Estimates by Accenture and the Stevens Institute of Technology predict that there will be 23 million vehicles with autonomous features on U.S. highways by 2035.

Self-driving capabilities raise complex questions when it comes to determining liability, however, as guidelines for assigning fault and determining roles in accidents involving such technology have not been determined. State and federal regulators are working to establish regulatory frameworks that will govern how automated vehicles will operate on public roads. Even so, experts predict the trend could transform insurance coverages in the long term, as liability shifts towards manufacturers and the traditional risk pool changes. A few auto makers, for example, have already pledged to accept liability for their future autonomous vehicles if the vehicle’s technology is responsible.

In addition, as automation increases (along with the hardware and software to support it), the need for liability protection against cyber theft, ransomware, hacking, and the misuse of company vehicle data could rise. Product liability is another area of increasing concern, whether from software bugs, memory overflow, or algorithm defects that cause a company’s self-driving vehicle to fail.

4. Artificial Intelligence

Artificial intelligence (AI) is optimizing and automating businesses processes at an exponential rate – according to one estimate by McKinsey & Co., AI applications could deliver additional global economic output of $13 trillion per year by 2030. Yet because this technology’s reach is still emerging, the question of liability for errors, breaches, or malfunctions looms large.

The McKinsey report describes four areas of vulnerability that can give rise to significant AI risks for organizations. These types of issues may fall under the radar when focusing on the benefits of AI but can lead to serious consequences if not considered.

As the use of robots surges, so too does the potential for claims involving bodily injury, property damage, financial loss, inequality, accessibility, and discrimination.

For example, poor pricing data could misgauge consumer demand – throwing a wrench into production plans. Less-than-perfect estimates of funds and resources required to ride out a threat or emergency could result in inadequate preparation. Businesses using AI could also fall prey to unintentional disclosure of protected consumer data. And a company’s reputation could take a hit if unclear consumer data-privacy settings end up causing a social backlash.

To address these liability protection gaps, companies using AI should consider enhancing insurance protections in the areas of errors and omissions, cyber security, business interruption, and indemnification.

5. Robots

From grocery stores to manufacturing, robotics technology is increasingly deployed across a wide range of industry sectors, leading to improved performance of all kinds of tasks with new efficiencies, safety, and quality. As the use of robots surges, however, so too does the potential for claims involving bodily injury, property damage, financial loss, inequality, accessibility, and discrimination.

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For example, more companies are using conversational agents (a form of robot or chatbot) to improve productivity and streamline internal operations – whether it’s helping with IT tasks, reporting monthly financials, or handling customer service. Even these robots come with risk, however. A KPMG study found that the use of such agents opens companies up to compliance risks and accessibility issues. Companies should use inclusive design practices, the report concludes, to ensure the bot is accessible to all potential users, regardless of working situation, capability, or language proficiency.

Staying Protected in the Future

Technological advances bring tremendous business opportunity, but they also expose companies to a wider range of general liability risks. To learn more about what’s driving general liability changes in 2019 and how to stay protected, read our related article here.

This website is general in nature, and is provided as a courtesy to you. Information is accurate to the best of Liberty Mutual’s knowledge, but companies and individuals should not rely on it to prevent and mitigate all risks as an explanation of coverage or benefits under an insurance policy. Consult your professional advisor regarding your particular facts and circumstance. By citing external authorities or linking to other websites, Liberty Mutual is not endorsing them.