Artificial Intelligence (AI), particularly generative AI tools like ChatGPT, Gemini and Copilot, is rapidly transforming industries, including the legal profession. While the potential benefits – streamlining workflows, enhancing research capabilities, and even drafting documents – are significant, the legal sector must address unique ethical, regulatory, and confidentiality concerns. This is why implementing a clear and comprehensive AI policy is essential.
What is an AI policy, and why is it critical for law firms?
An AI policy is a framework that governs the use of AI tools within an organisation. For law firms, such a policy ensures that the adoption of AI aligns with professional obligations, client expectations, and regulatory standards. Lawyers operate in a high-stakes environment where breaches of confidentiality, misuse of data, or reliance on inaccurate AI-generated content can have severe consequences—not only for clients but also for the firm’s reputation and compliance status.
A robust AI policy addresses these risks, setting clear guidelines for when and how staff can use AI tools, ensuring ethical and responsible use while maximising their potential benefits.
Key risks to address in your AI policy
- Confidentiality and privacy
Generative AI tools – particularly free versions – often rely on external servers to process data. This creates a risk that sensitive client information or proprietary firm data could be stored, shared, or used to train AI models. Such actions might breach data protection laws, professional obligations, or both. The policy should strictly prohibit entering client data into publicly accessible AI tools unless explicit consent is obtained. The policy should clearly make the distinction with any alternative “safe” AI environments to which the firm has access. - Intellectual property (IP)
AI tools can inadvertently infringe on third-party intellectual property rights by replicating copyrighted material or exposing proprietary firm information. Conversely, they might make firm-owned content accessible to other users. An AI policy should outline safeguards to mitigate these risks. - Accuracy and reliability
AI-generated outputs are not guaranteed to be accurate and may even include “hallucinations” (plausible but false information). Relying on such outputs without verification could damage a client’s case or the firm’s credibility. Lawyers must be trained to critically evaluate AI-generated content and avoid relying on it for final decisions without human oversight. - Bias
AI tools are vulnerable to bias in their training data or algorithms. For example, biased tools could unintentionally perpetuate discriminatory practices, exposing the firm to reputational and legal risks. An AI policy should emphasise the importance of bias mitigation and regular audits of AI-generated content. - Compliance with ethical and regulatory standards
The Solicitors Regulation Authority (SRA) imposes strict requirements regarding client care, confidentiality, and professional conduct. An AI policy ensures compliance by specifying when client consent is required, how AI tools should be used, and the oversight needed to maintain ethical standards.
Practical benefits of an AI policy
While the risks are considerable, the potential benefits of AI—when managed responsibly—are too valuable to ignore. A robust AI policy allows law firms to:
- Enhance productivity: Streamline repetitive tasks, such as summarising documents or generating initial drafts, freeing up lawyers for higher-value work.
- Ensure consistent use: By maintaining a schedule of approved AI tools and providing staff with guidelines, the firm ensures consistent and secure use across all departments.
- Foster trust: Clear policies reassure clients that their data and cases are handled with the utmost care, even when AI is involved.
What should your AI policy include?
A comprehensive AI policy for law firms should cover the following:
- Guiding principles: Respect for confidentiality, bias mitigation, transparency, and compliance with ethical and regulatory obligations.
- Permitted uses: Clear definitions of approved AI tools and use cases, e.g., drafting documents, legal research, or marketing.
- Restrictions: Prohibitions on using AI for sensitive tasks without client consent or for decision-making without human oversight.
- Monitoring and responsibility: Assign roles (e.g., an IT Manager or Data Privacy Manager) to oversee compliance and update the policy as technology evolves. Set out how these roles dovetail with the COLP and other people in management.
- Training and awareness: Ensure staff understand the risks and limitations of AI tools and are equipped to use them responsibly.
Insights from the recent SRA Risk Outlook report
The latest SRA Risk Outlook report on AI (“The use of artificial intelligence in the legal market”) emphasises the growing importance of addressing technological advances, including the adoption of AI, within the legal sector. It highlights specific risks associated with the use of generative AI tools, such as potential breaches of confidentiality, the propagation of biased or inaccurate information, and the implications of inadequate oversight.
The report underscores that while AI can improve efficiency and productivity in legal services, its use must align with the SRA’s core principles of competence, integrity, and independence. A notable concern is the increased risk of data leaks or misuse when client information is fed into AI systems, particularly if those systems operate on public servers. The report also calls attention to the role of senior management in setting clear policies to guide AI usage, ensuring compliance with both professional obligations and data protection laws.
In light of these risks, the SRA recommends that firms develop robust governance structures for AI adoption, conduct regular risk assessments, and ensure that their staff are well-trained to identify and mitigate risks.
Insurance Considerations for AI Adoption
The SRA highlights that law firms must review their professional indemnity insurance (PII) policies when integrating AI into their practice. Insurers may impose specific requirements or exclusions related to AI usage, so firms need to:
- Inform Insurers: Notify your insurer about the adoption of AI tools and their intended use. Transparency ensures that the insurer can assess any additional risks and confirm coverage.
- Assess Coverage: Check whether your current PII policy adequately covers risks associated with AI, such as errors resulting from AI-generated content, breaches of confidentiality, or IP disputes.
- Mitigate Risk: To minimise insurance risks, firms should implement safeguards, such as restricting sensitive client data from being entered into public AI tools, verifying AI-generated outputs, and ensuring robust oversight.
- Engage Early: Involve your broker or insurer early in the AI adoption process to understand their perspective on risk and compliance. This proactive approach can help overcome potential barriers related to exclusions or premium increases.
A final word: striking the balance
AI is a powerful tool, but it is not (yet) a substitute for professional judgment. A clear AI policy empowers lawyers to harness AI’s potential while safeguarding the integrity and trust at the heart of their practice. By proactively addressing the risks and setting robust standards, law firms can embrace innovation without compromising on professionalism or client care.
Does your firm have an AI policy in place? If not, now is the time to act. The age of AI is here, and a well-crafted policy could make all the difference in staying ahead while staying compliant.
