Colorado ADMT rules: hearing and last day for written comments · Oct 26, 2026 · See what changes
The legal question of who bears responsibility when an AI system causes harm, such as financial loss, physical injury, discrimination, or privacy violations. AI liability is unsettled law in most jurisdictions. The European Commission withdrew its proposed AI Liability Directive (notice C/2025/5423). The revised EU Product Liability Directive extends product liability to software, including AI. In practice, liability questions for small teams usually arise in contracts: does your vendor indemnify you if their AI causes a breach? Do your customer contracts limit your liability for AI-generated errors?
Why this matters for your team
Your AI vendor's standard terms almost certainly limit their liability for AI errors to the cost of the subscription. Read the indemnification clauses in both your vendor contracts and your customer-facing contracts — you may be absorbing liability for AI failures that your vendor's terms push onto you.
A law firm's AI research assistant cites a non-existent case in a court filing. The question of whether the law firm, the AI vendor, or both bear liability for the resulting sanctions is an AI liability question.