Errors and omissions claims activity in Canada has increased, and the claims themselves have grown more complex and more likely to end in litigation, according to Valerie Cusano (pictured), vice-president of commercial for Alberta at Westland Insurance.
Defence costs have risen alongside claim frequency, she said. The sectors drawing the most attention are those where client needs are growing more complex and expectations around professional service are rising.
Part of the pressure, Cusano said, is that clients now arrive better informed. "Clients are researching more than ever online, their own issues before they even consult a professional," she said, which raises expectations on both the speed of service and the outcome professionals are expected to deliver.
The legal sector is one area seeing more triggers, she said, with lawyers tasked with a widening range of matters and an expectation that each will be resolved quickly. Financing and IT services face similar pressure.
IT consultants are a particular exposure point as firms adopt new systems, including artificial intelligence. Clients expect seamless integration when they bring in a new consultant or software program, Cusano said, and that is not always what happens. The area is complex and client demand is increasing.
Financial institutions, banks and accountants face an expectation that they will keep performing regardless of external shocks, including geopolitical instability such as tensions between the United States and Iran, she said. Fraud protection has become a sharper focus, with scams growing more sophisticated and clients expecting banks and credit card providers to keep their money safe.
Cusano said she had recently seen a fraudulent charge appear on one of her own cards, prompting an investigation she fully expects the provider to resolve – the kind of baseline expectation, she said, that financial providers now operate under. Insurance providers themselves are under increased scrutiny as well, she said.
The common thread, Cusano said, is not professional incompetence. "Claims aren't increasing just because people are making mistakes in these industries," she said. "They're really increasing because the environment that professionals are operating in is much more complex and much less forgiving."
AI has changed the E&O risk picture on both sides of the ledger, Cusano said.
The technology lets firms strip out human error that has long dogged professional work. Law firms that once relied on articling students to research and compare case law can now use AI tools to do much of that work and to fact-check, she said. The insurance profession faces a parallel shift: where humans once checked policy wordings against intended coverage to confirm that what was promised was actually put in place, AI tools can now assist and head off many of those errors.
"AI is really a double-edged sword from my perspective when it comes to claims," Cusano said. The same reliance that reduces human error becomes a liability when it goes too far. Over-reliance on generative AI tools can produce significant financial mistakes, she said, making the issue a balance between using AI to clear out easily automated tasks and keeping a human supervisor in place.
The risk is not hypothetical. Cusano pointed to a law firm that used generative AI to build a case summary and legal argument, only to find that some of the case citations bearing on the outcome were fake, fabricated by the AI itself. Because an adjudicator has to rely on citations being correct and properly cited, she said, the discovery forces the entire legal argument to be thrown out, with the financial implications that follow.
The lesson, Cusano said, is that AI cannot simply be unleashed across a company. "It really has to continue to require human supervision," she said.
