Chicago Business Attorney Blog
Yes. It has already happened, and the legal defense you might be counting on, “the AI said it, not us,” has already failed in court.
If your business uses any AI tool that talks to customers, drafts content, or answers questions, whether that’s a customer service chatbot, an AI powered search feature on your website, or a marketing team using generative AI to write copy, you need to understand that your business is legally responsible for what that tool says. Not the AI company that built it. You.
The Case That Should Change How You Think About This
In a case that has become the go to example for this exact issue, an airline’s customer service chatbot told a passenger about a bereavement fare policy that did not actually exist. The passenger relied on that information, booked accordingly, and was later denied the fare the chatbot promised. When the airline argued that the chatbot was essentially a separate entity responsible for its own words, a tribunal rejected that argument outright. The airline was held responsible for what its own tool told a customer, full stop.
That ruling matters far beyond the airline industry. The underlying principle applies to any business that puts an AI tool in front of customers. If your chatbot promises a discount that doesn’t exist, misstates your return policy, or gives incorrect information about your product, your business owns that statement the same way it would own a promise made by a human employee on the phone.
What Legal Theories Actually Apply Here
Businesses tend to assume AI hallucinations are a new, undefined category of risk. In practice, courts are mostly applying legal theories that have existed for decades, just to a new source of the false statement.
Misrepresentation and breach of contract claims arise when a customer reasonably relies on something your AI tool told them and suffers a loss as a result, the exact fact pattern from the bereavement fare case. Defamation claims arise when an AI tool generates false, damaging statements about a real person, something that has already led to real lawsuits against AI companies directly. Consumer protection claims can apply when AI generated marketing or customer facing content makes false or misleading claims about your products or services. And where a business uses AI in a professional capacity, drafting contracts, giving guidance that resembles legal or financial advice, or making decisions that affect customers, negligence claims can follow if that reliance on AI falls below a reasonable standard of care.
Why “The AI Made a Mistake” Isn’t a Legal Shield
Here is the distinction that actually matters in these cases, and it is more nuanced than “any hallucination equals liability.”
In a separate and widely discussed case, an editor received a false AI generated summary accusing someone of embezzlement. The court ultimately found no liability, but not because AI generated content gets a pass. The court found that the editor had been specifically warned the AI tool could not access the relevant source material and that the information might be unreliable, and that a reasonable person would have caught the red flags rather than relying on the output. Fault, in other words, still has to be proven, and the specific facts of how the AI output was used and relied upon are what decide the outcome.
Put those two cases side by side and the lesson for business owners becomes clear. When your business publishes or repeats an AI tool’s output without a human catching an obvious problem, and a customer or third party reasonably relies on it, you are exposed. When you have real review processes and clear warnings in place, and someone ignores obvious red flags anyway, you have a much stronger defense. The difference is not the technology. It’s whether your business treated the AI output the way it would treat any other unverified claim before putting it in front of the public.
Where This Risk Actually Shows Up for Most Businesses
You do not need a customer facing chatbot for this to apply to you. AI hallucination liability is showing up across a wide range of ordinary business functions, not just cutting edge AI products.
- Customer service chatbots and AI powered search features that answer questions about pricing, policies, or product details.
- Marketing copy or social content drafted with AI tools that includes fabricated statistics, invented customer claims, or incorrect factual assertions about your business or competitors.
- AI generated contracts or business documents that include hallucinated terms, incorrect legal citations, or clauses that don’t reflect what was actually negotiated.
- Internal use of AI for guidance that resembles professional advice, where an employee relies on an AI generated answer instead of verifying it, and that reliance affects a customer or a business decision.
What Actually Protects Your Business
None of this means AI tools are too risky to use. It means they need the same oversight you would apply to any employee who is new, occasionally confidently wrong, and not yet trusted to speak for your business unsupervised.
Build a human review step into anything AI generated before it reaches a customer, a contract, or a public post, especially anything involving pricing, policy, or factual claims. Put clear terms of use in front of customers interacting with AI tools your business deploys, understanding that a disclaimer alone did not save the airline in the bereavement fare case, but it does become part of the fault analysis when paired with actual review practices. And revisit your vendor contracts for any third party AI tool your business relies on, since liability allocation between you and that vendor is often thin or nonexistent in standard agreements.
The Bottom Line
The question in the headline has a clear answer. Yes, someone can sue your business over what your AI tool told them, and at least one court has already rejected the argument that the tool is somehow a separate party from the business that deployed it. The businesses handling this well are not avoiding AI. They are treating its output the way they would treat any unverified statement before it reaches a customer, and building the review process to match.
About George Bellas
George Bellas is a business attorney at Bellas & Wachowski in Chicago, where he helps business owners understand and manage the legal exposure that comes with deploying AI tools in customer facing and operational roles. From chatbot liability to AI generated contract language, George works with clients to build the review practices and vendor agreements that actually hold up if an AI hallucination becomes a legal claim. If your business uses AI tools and you are not certain where your liability actually sits, schedule a consultation with George Bellas today at 800.825.9260 or visit bellas-wachowski.com.