Chatbot Legal Issues: Lessons From Air Canada

When chatbots promise refunds are companies on the hook? Air Canada recently learned firsthand how chatbot legal issues can send a company to court.
United States Technology
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When chatbots promise refunds are companies on the hook? Air Canada recently learned firsthand how chatbot legal issues can send a company to court.

After being misled by the airline chatbot about its bereavement travel policy, Jake Moffatt, who booked a flight following a family loss, fought for a partial refund. Despite the chatbot's incorrect guidance, the airline initially resisted refunding, suggesting the chatbot's advice was separate from the airline's official policy.

The case, which reached Canada's Civil Resolution Tribunal, highlighted the responsibility of companies for their chatbots' information, leading to a ruling in Moffatt's favor for a partial refund and additional damages.

This incident serves as a crucial reminder for Texas businesses about the unpredictability and potential legal implications of using artificial intelligence, especially chatbots, in customer service and business operations.

AI Chatbot Liability Problem

The integration of AI chatbots into customer service and business operations introduces a complex web of liability issues. When a chatbot like Air Canada's provides incorrect information or makes unauthorized decisions, the question arises: who is legally responsible?

The legal community is grappling with this question, as traditional laws don't fully address the autonomous actions of AI systems. Businesses must navigate these uncharted waters carefully, ensuring their AI systems are well-regulated and monitored to prevent the dissemination of false or legally binding information inadvertently.

Moreover, the liability problem extends beyond mere misinformation to include issues related to data security and privacy breaches. Chatbots, by design, interact with users and collect data, posing a risk if this data is mishandled or exposed. The potential for chatbots to be exploited for phishing attempts or to inadvertently disclose sensitive information requires businesses to implement stringent data protection measures.

Other Generative AI Issues Emerging for Business Owners

Beyond chatbots, generative AI technologies are introducing new layers of complexity for business owners. These systems, capable of creating content that resembles human output, raise significant concerns about copyright infringement, authenticity, and ethical use. For instance, generative AI tools that produce text, images, or music could inadvertently violate existing copyrights, leading to legal disputes and significant financial liabilities for businesses.

The issue of deepfakes—hyper-realistic digital content generated by AI—presents another challenge. These can be used to create misleading or defamatory content that damages reputations and misleads consumers. Businesses using generative AI must navigate these ethical and legal minefields, ensuring their use of AI respects intellectual property rights and does not contribute to the spread of misinformation.

How to Avoid Legal Trouble When Considering Chatbots and Other AI

The evolving nature of AI technology means that legal precedents and regulations are continuously playing catch-up. Businesses must stay informed about legal developments and be prepared to adjust their AI strategies accordingly. This might involve engaging in active dialogue with legal experts, regulatory bodies, and AI developers to advocate for clear guidelines and safeguards that address the unique challenges posed by AI chatbots.

Furthermore, the transparency and explainability of AI decisions are becoming critical issues. As AI systems play a more significant role in business operations, the ability to understand and explain how AI decisions are made is crucial for compliance with regulations and for maintaining public trust. Businesses must ensure their AI systems are not only effective but also transparent and accountable.

Here are additional steps business owners can take:

  • Have a plan – To minimize legal risks, businesses should adopt a proactive and strategic approach to AI implementation. This involves conducting thorough risk assessments to identify potential legal issues and integrating robust compliance measures from the outset. Regularly updating these measures in line with evolving AI capabilities and legal standards is essential.
  • Clarify the policy – Creating clear terms of use and privacy policies that inform users about the role and limitations of AI in their interactions with the business can provide an additional layer of legal protection.
  • Educate your team – Investing in AI literacy and training for staff can help ensure that AI tools are used responsibly and in compliance with legal and ethical standards.
  • Employ human oversight – Human review can catch errors or unethical content generated by AI, providing a safeguard against potential legal and reputational damage. Establishing a feedback loop where AI performance and its implications are continuously monitored and adjusted based on user interactions and feedback can also help mitigate risks.


The Air Canada incident is another wake-up call for businesses integrating AI into their operations. As AI technologies become more sophisticated and widespread, the legal implications and responsibilities of businesses will only increase. To ensure that your business is prepared and protected, consider consulting with legal experts who specialize in this area.

Originally published March 15, 2024

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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