Technology claims case study: AI aquarium accident
AI technology malfunctions and causes significant financial loss due to contract breach
A global technology company who manufacture artificial intelligence (AI) powered smart controllers for aquariums has a revenue of $500,000. The product monitors the tanks environmental health which protects the fish and other marine life.
The smart controller is the perfect solution to reduce manual cleaning work, as well as being able to track the overall environment of fish tanks more accurately. An exotic fish supplier purchased the technology for one of their tanks and requested the full professional system, alongside the app which would notify the supplier about their aquarium’s temperature and humidity.
After installation and several months of perfect operation, the AI software for one of the 500L tanks was disrupted and began to heat the water temperature slowly. On top of this, the smart system failed to provide the standard warning notifications to the client via the app as the temperature rose.
The amount that this claim accumulated could have led them into insolvency if the correct insurance had not been in place.
The exotic fish supplier’s tank temperature reached 34 degrees – 8 degrees over the standard operating temperature, resulting in the fish and coral perishing throughout the day.
Due to the size of the tank, the exotic fish supplier was unable to immediately remove the fish and the tank itself had suffered so much destruction it was becoming a health and safety issue. The supplier had multiple contracts in place with various restaurant chains to provide exotic fish, which they were now liable for. To replace the exotic fish and the tank would cost $25,000, but the additional contract breach amounted to $150,000.
After examination of the tank and the software, it was identified that the fault was with the technology company, leaving them liable for the damages and financial loss. The technology company was fortunate enough to be protected under CFC’s specialist technology insurance: CFC’s policy covers bodily injury and property damage as well as financial loss arising out of technology products and services. The amount that this
claim accumulated could have led them into insolvency if the correct insurance had not been in place. In this case the technology malfunction caused the exotic fish supplier financial loss, reputational damage and breach of contract.
The exotic fish suppliers alleged that their forecast revenue had been predicted to be cut short by 50%. The technology company would be liable for this if substantiated. CFC’s award-winning claims team were able to resolve the matter quickly and salvage the business relationship between the parties, as well as compensate the exotic fish supplier on behalf of the technology company for the losses that occurred.
CFC’s technology insurance also extends to products and services liability which is covered in the E&O clause. This would mean the technology company would not have to worry about whether the malfunction was a result of a hardware or software issue, as the policy will cover both.
It’s more important now than ever for companies to have adequate technology insurance to protect themselves from potential claims involving financial losses, property damage, bodily injuries or other losses/harms that have occurred because of the risk associated with AI and technology products.
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