Artificial intelligence is rapidly transforming consumer financial services and countless other industries. As AI systems become more autonomous, adaptive, and deeply integrated into commercial decision-making, courts, regulators, and industry participants are increasingly confronting a critical question: when AI causes harm, who should be held responsible?

In our latest episode of our award-winning, weekly Consumer Finance Monitor Podcast, our host Alan Kaplinsky (the founder, Chair for 25 years, and now Senior Counsel of our Consumer Financial Services at Ballard Spahr LLP) had the pleasure of speaking with Mark Geistfeld, the Sheila Lubetsky Birnbaum Professor of Civil Litigation at New York University School of Law and the reporter for the American Law Institute's groundbreaking new project, Principles of the Law, Civil Liability for Artificial Intelligence.

The discussion explored one of the most consequential emerging legal issues in the AI era: how traditional tort law doctrines, including duty, reasonable care, causation, foreseeability, product liability, and allocation of responsibility, should apply to AI systems.

Professor Geistfeld explained why the ALI chose to pursue a "principles" project rather than a traditional restatement. Because there is still relatively little AI-specific case law, the project is intended to provide a forward-looking framework that adapts existing tort doctrines to emerging AI technologies. As Mark noted during the discussion, the project seeks to determine "what existing law, properly adapted to this new technology, would require."

Their conversation covered a wide range of timely and challenging issues, including:

Whether AI systems should be treated as "products" or "services" for purposes of tort liability;
How liability may be allocated among foundation model developers, deployers, integrators, and end users;
The role of reasonable care obligations in AI development and deployment, including testing, monitoring, and guardrails;
The growing importance of transparency and industry best practices;
The "black box" problem and the difficulty of proving causation when even developers may not fully understand AI outputs;
The tension between fostering innovation and ensuring accountability; and
How tort liability and regulatory frameworks can operate together in a complementary manner.
How rapidly advancing AI capabilities, including developments involving autonomous agents and cybersecurity vulnerabilities, are accelerating the urgency of creating coherent legal frameworks.

One particularly interesting aspect of the discussion involved Professor Geistfeld's explanation of how AI liability differs from traditional product liability analysis because AI systems evolve, adapt, and operate probabilistically. He emphasized that many of the challenges courts will face resemble issues already encountered in pharmaceutical litigation, toxic torts, and medical malpractice cases involving probabilistic causation.

The ALI project remains in development, but preliminary drafts are already beginning to shape legal and academic discussions. Given the pace of AI advancement, courts and policymakers are likely to confront these issues long before a final completed volume is published.

This podcast continues our ongoing intensive coverage of artificial intelligence and consumer financial services, including our recent programs discussing the White House AI Action Plan (listen to part 1 here and part 2 here), the White House AI Framework (listen here) and other AI regulatory developments.

The episode provides valuable insights for financial institutions, fintech companies, AI developers, compliance professionals, litigators, and anyone interested in the future legal framework governing artificial intelligence.

Consumer Finance Monitor is hosted by Alan Kaplinsky, Senior Counsel at Ballard Spahr, and the founder and former chair of the firm's Consumer Financial Services Group. We encourage listeners to subscribe to the podcast on their preferred platform for weekly insights into developments in the consumer finance industry.