GCOLE@SUSHI.STANFORD.EDU (George S. Cole) (12/11/87)
I have researched this area and a paper is forthcoming -- as soon as the
USC Computer/Law Journal editorial staff are ready -- on "Tort Liability for
Artificial Intelligence and Expert Systems". The trite answer is yes, there can
be a suit and EVERYBODY INVOLVED will be named -- because the plaintiff's
lawyer will realize that the law does not clearly know who is liable (including
the plaintiff).
A short answer is to cite the Restatement of Torts, 2nd, Section 552:
"Information Negligently Supplied for the Guidance of Others:
one who, in the course of his business, profession, or employment, or in
any other transaction in which he has a pecuniary interest, supplies false
information for the guidance of others in their business transactions, is
subject to liability for pecuniary loss caused to them by their justifiable
reliance upon the information, if he fails to exercise reasonable care or
competence in obtaining or communicating the information".
This section was cited without success in Black, Jackson and Simmons Insurance
Brokerage, Inc. v. IBM, 440 N.E. 2d 282, 109 Ill. App. 132 (1982). The phrase
"in the course of his business" was strictly construed to prevent liability
under this cause of action (there were others, including warranty) as the
court noted that the defendant had sold both hardware and software to allow
the firm to process information. But in Independant School District No. 454,
Fairmont, Minnesota v. Statistical Tabulating Corporation, 359 F. Supp. 1095
(N.D. Ill, 1973) the court permitted a negligence action to be brought against
the third-party statistical bureau whose miscalculations had led to the
under-insurance of a school which had then burned down. The court stated:
"[O]ne may be liable to another for providing inaccurate information which
was relied upon and caused economic loss, although there was no direct
contractual relationship between the parties...The duty to do work reasonably
and in a workmanlike manner has always been imposed by law..." Factors the
court suggested to consider included (1) the existence, if any, of a guarantee
of correctness; (2) the defendant's knowledge that the plaintiff would rely
upon the information; (3) the restriction of potential liability to a small
group; (4) the absence of proof of any correction once found being delivered
to the plaintiff; (5) the undesirability of requiring an innocent party to
carry the burden of another's professional mistakes; and (6) the promotion
of cautionary techniques among the potential defendants for the protection
of all potential plaintiffs.
Did the ES indeed make a mistake? Suppose Joe has said he plans to
invest for 15 years -- too short for real estate, too long for bonds, and
in that light the "Black Monday" might be seen as a temporary aberration.
(I.e. Joe caused the harm by selling out at the bottom rather than holding
on for the 15 years as planned.)
Can the experts hide behind the company? Those who are professionals
(which is a legal phrase for "holders of a semi-monopoly") probably cannot be
fully shielded; the rest may have to seek indemnity from their corporation.
It will depend in part on their employment contract, or lack thereof.
Can the knowledge engineers be found liable if their mistake led to
this? What sort of mistake? A standard programming flaw is not the same as
a design flaw. What if the mistake lies at the boundary -- who is responsible
for realizing that the computer has to have rules for assessing "market
psychology" that will quantitatively assess the subtle dynamics of what
the current "feel" for the market is? Did the domain experts learn that the
computer was going to do more than crunch numbers?
This is both a nascent and a complex legal area. My hope is that a
number of the AI and ES companies realize the potential exposure and that the
evolution of the law can be influenced by their behavior -- and begin to
plan defensively. It is a bit more expensive initially, affecting immediate
profits; but it can provide tremendous savings both for the firm and for the
industry over the longer run.
George S. Cole, Esq.
793 Nash Av.
Menlo Park, CA 94025
GCole@Sushi.stanford.edu (until it goes away)
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