Tata Consultancy Services (TCS) is a multinational technology company that provides IT services, consulting and business solutions to businesses across various industries. On November 21, 2025, TCS and private equity firm TPG announced that they will invest $2 billion to create a joint venture focused on AI data centers. This is one example of the many billions of dollars flooding into the AI industry. Many describe the current environment of massive investment, rapid innovation and competition for talent as an AI “Gold Rush”.
Businesses use AI to automate tasks, enhance customer service, analyze data for insights and improve efficiency across operations. Key applications include using chatbots for customer support, personalizing marketing through data analysis, optimizing logistics with predictive modeling and streamlining internal processes like data entry and content creation.
Better Customer Experience: Companies can improve customer service by being available 24/7 and replying to all social media comments in real time.
Improved Decision Making: AI can help a business understand which of its products and services are or are not profitable.
Improved Budget Management: AI can help companies understand costs and help reduce expenses relative to all facets of their operation.
Innovation: Analytical AI can provide an overview of current and future trends that are powered by millions of data points to help A company’s R&D team.
Predictive Analytics: AI can help businesses forecast market changes and make data-driven decisions with greater confidence.
From a D&O insurance perspective, AI introduces an emerging risk that underwriters are actively reviewing and scrutinizing. Underwriters are asking for details regarding a company’s AI capabilities to understand the viability of their AI and its purpose. AI exclusions have not been added to D&O policies yet, but if claims continue to increase, then that could become a reality.
Common Examples of AI-Related D&O Securities Claims
- AI washing which occurs when the shareholders sue alleging inflated share price due to overstated AI capabilities.
- Derivative suits which claim failure of oversight for unsafe or biased AI deployment.
- SEC investigations into AI transparency failures.
- Suits from customers are harmed by flawed AI-driven decision making.
- Vendor lawsuits alleging misuse of licensed AI technology or data.
The graph below illustrates that the sources of major securities litigation, apart from AI claims, have been decreasing in the last five years. In 2024 there were 15 total D&O shareholder class action AI claims and in the first half of 2025 there were already 12 such claims.
To avoid potential D&O liability related to AI exposures and ensure adequate D&O coverage, companies should adopt proactive risk mitigation strategies:
Develop an Internal AI Policy: Companies should establish clear internal policies on AI usage.
Implement AI Governance: Like any corporate governance program, the AI governance policies and procedures should be reviewed by executive committees.
Transparency is a Must! All AI-related disclosures are factual, verifiable and must comply with SEC regulations.
Education and Training: Directors and officers need to be educated on the risks associated with AI misrepresentation and how to navigate regulatory compliance.
Consult Internal and Outside Counsel: Help organizations navigate the complexities of AI disclosures and risk management.
How can companies and D&Os protect themselves?
Companies must clearly document their AI strategies and ensure disclosures are accurate and not misleading and the leadership teams need to be actively involved in AI governance to mitigate risks and demonstrate responsible management. Finally, the company’s D&Os should be available to D&O underwriters to discuss their AI policies, procedures and strategies.
About the Author:
Dan Vecchio is the National Management Liability Practice Leader at Wholesure. Dan focuses his efforts on assisting his retail insurance agency partners in finding solutions for their hard-to-place management liability risks. Dan can be reached at [email protected].