Innovating Liability: The Virtuous Cycle of Torts, Technology and Liability Insurance

Anat Lior
25 YALE J.L. & TECH. 448

Emerging technologies, such as artificial intelligence and quantum computing, are predicted to grow exponentially over the next decade. This growth should lead to a substantial economic impact on various commercial markets, but it will also lead to different types of harms. These may include physical harms, such as a chess robot breaking a child’s finger, or non-physical harms, such as excessive privacy breaches and cyberattacks enabled by quantum computing. While considering the safe integration of emerging technologies into our commercial stream, stakeholders often overlook the vital role of insurance. So far, scholars have identified different roles insurance hold, such as spreading and reducing risk. This Article identifies a new role insurance has in the context of emerging technologies—enabling safe and productive innovation.

The novelty of emerging technologies leads to difficulties in premium estimations and setting the terms of a liability policy to genuinely reflect the risks associated with an emerging technology. Despite this difficulty, insurance possesses the ability to enhance the integration of emerging technologies into daily commercial routines while mitigating the harms that may arise from this process. Throughout history, from the industrial revolution to outer space exploration, insurance has allowed innovative manufacturers to pursue breakthrough technologies while hedging their risks.

The intersection of torts, technology and liability insurance is perpetually developing as each field continuously fuels the others. Emerging technologies lead to new types of risks and losses, creating new liability rules, which in turn drive the purchase of liability insurance. Other times, tort law reacts slowly to harms caused by emerging technology leading to the purchasing of liability insurance and only then to the formation of liability rules, which are influenced by the existence of these policies. Yet in other instances, the existence of liability rules and insurance helps facilitate the safe dissemination of emerging technologies into our commerce stream. This virtuous cycle is a dominant one in the realm of liability law. However, to date, little has been discussed on the interplay between these three fields.

This Article challenges the notion that insurance is inadequate to cover emerging technologies given their novelty. It argues that insurance holds a vital underexplored role in advancing safe and healthy innovation and that, as a result, regulators should actively ensure its availability to both manufacturers and consumers. It aims to flesh out the influence torts, liability insurance and emerging technologies have on each other. Liability insurance allows consumers and manufacturers of emerging technologies to innovate while hedging their risks, thus acting as a catalyzing force of innovation itself.