AI legal issues seem to be abound in the field today; put simply, the legal profession is reaching a crossroads with artificial intelligence (AI).
Certainly, the opportunities AI presents for efficiency and innovation are significant, but there are also risks. Lawyers and legal professionals need to understand, at least from a high level, why these risks exist and what the risks are.
Fundamental considerations regarding AI legal issues
Understanding the risks and benefits of a significant tool like AI is not only smart practice but is demanded by various ethical and professional obligations and rules.
Comment 8 to Rule 1.1 to the Model Rules of Professional Conduct provides a framework for understanding the rules, obligations, and risks that lawyers face when adopting new technologies.\
The Comment requires that lawyers and legal professionals understand the risks and the benefits of relevant technology like AI.
The risks of AI stem from:
The ethical rules governing how lawyers practice and their duties to courts and clients.
- Court and professional rules
- Practice management considerations
- Not understanding the benefits and expectations of clients and the public
Let’s take a look at these AI legal issues and explore the risks for legal professionals in more detail.
Hallucinations and inaccuracies: The danger of AI misinformation
At the outset, it’s essential to understand how AI tools, particularly Gen AI and large language models, work.
These models aren’t necessarily looking for the “right” answer to any inquiry. Instead, they are predicting what words and phrases should be used to answer whatever question is put to them.
While this generally results in useful responses, it does not always yield correct answers.
As a result, AI tools, particularly large language models (LLMs), tend to “hallucinate.”
In this context, hallucination refers to AI fabricating information, including nonexistent case law, incorrect citations, or misleading legal conclusions.in addition, because the tools are not looking for the right answer, they can provide inaccurate results as well: they might, for example, cite an existing case correctly but for the wrong proposition.
The tendency to hallucinate and provide inaccurate responses has already led to real-world consequences, with courts sanctioning lawyers who submitted AI-generated briefs riddled with fictitious citations or inaccuracies.
The ethical rules
The ethical rules governing how lawyers practice and their relationships with clients, court, and each other create various risks for the use of AI.
The duty of competence: Understanding AI legal issues (and benefits)
The most fundamental rule governing the use of AI is Model Rule 1.1. This rule mandates that lawyers provide competent representation, and Comment 8 clarifies that this includes understanding “the benefits and risks associated with relevant technology.” AI falls squarely into this category.
The days when a lawyer could plead ignorance about technology are long gone. Whether drafting contracts, conducting legal research, or managing discovery, attorneys must know when and how to use AI tools — and when human oversight is essential.
Competence extends beyond merely knowing how to operate AI-powered tools. Lawyers must understand their limitations, biases, and potential for error. Otherwise, they risk malpractice exposure, reputational damage, and, in extreme cases, disciplinary action.
Understanding the need to be familiar with the risks and benefits of any technology, particularly AI, is the fundamental guiding principle for lawyers and legal professionals
The duty to protect client confidentiality
Another critical risk AI presents relates to client confidentiality.
Model Rule 1.6 obligates lawyers to safeguard client information. The obligation not only extends to confidential information but to any “information relating to the representation of a client.”
Many AI tools, particularly free or cloud-based platforms, collect and store user inputs.
If a lawyer inputs information relating to the representation of a client into an AI system without understanding how that data is stored or used, they may be inadvertently waiving privilege or exposing sensitive client information to third parties.
Firms should develop clear policies on AI use, ensuring that any platform used complies with ethical obligations related to confidentiality and data security. It is crucial to understand where and how AI models store and process data before integrating them into legal practice.
The duty to supervise: A challenge for supervising lawyers
Lawyers — especially those who did not grow up in the digital age — must recognize their duty to supervise AI use within their firms. Model Rule 5.1 states that senior lawyers must ensure compliance with ethical rules by those they oversee.
Rule 5.3 extends this duty to the supervision of non-lawyer assistants, which increasingly includes the use of AI-powered tools.
All lawyers in a supervisory capacity and law firms need to understand and expect that younger lawyers and legal professionals will use AI tools. Thus, they themselves need to understand the risks and limitations of AI tools and create policies governing use.
Without this oversight, younger lawyers and staff may misuse AI tools in ways that expose the firm to liability; it’s not enough to delegate AI-related decisions to tech-savvy associates — senior lawyers must actively engage in discussions about AI’s role in legal practice.
The duty to bill reasonably and AI’s impact on the billable hour
Billing practices are also under scrutiny as AI becomes more prevalent.
Model Rule 1.5 requires that legal fees be reasonable and overbilling for AI-generated work is a growing ethical concern. If an AI tool completes a research task in five minutes but a lawyer bills for an hour, that’s not only unethical — it’s potential fraud.
Clients are becoming more sophisticated in tracking legal fees and are likely to challenge billing practices that do not reflect actual work performed.
On the flip side, firms can use AI to demonstrate efficiency and provide value-based pricing models, aligning their services more closely with client expectations. AI is fundamentally reshaping what clients consider a fair and reasonable legal fee, and firms that ignore this shift do so at their peril.
The duty of candor
Model Rule 3.3 requires a lawyer to be truthful to the tribunal, and Rule 3.4 demands fairness to opposing parties and counsel. Using AI without verification can result in the filing of false pleadings and discovery responses, leading to sanctions, exclusion of evidence, and, perhaps most damaging, loss of credibility.
Given how much lawyers trade on their reputations, these risks cannot be overstated.
Court and Professional Rules and AI legal issues
Beyond ethical obligations, lawyers must also consider various court rules governing the submission of pleadings and evidence.
Federal and state rules require candor to the tribunal, and AI-generated hallucinations put lawyers at risk of violating these rules.
Recent cases have shown courts sanctioning attorneys for submitting AI-generated materials without verifying their accuracy.
The improper use of AI in discovery responses — such as relying on AI to generate document summaries without human review — can lead to evidence being excluded or entire cases being jeopardized.
Lawyers and legal professionals also need to be aware that various courts have issued their own rules governing the use of AI; these rules range from outright prohibition to a duty to reveal the use of AI in any pleading.
Bar associations have also issued guidance and requirements for the use of AI, and lawyers need to be aware of these rules and the risks they create for not heeding these rules
AI legal risks in operations and management
There are also risks of using AI that stem from its impact on firm and practice management.
For example, an underappreciated risk is whether legal malpractice insurance policies will cover AI-related errors.
Many policies contain exclusions for certain types of technology misuse or negligence; if an AI tool generates faulty legal analysis that leads to a client’s financial loss, a lawyer may find themselves without coverage.
Lawyers should review their policies and work with insurers to understand their liability exposure when using AI.
Lawyers and law firms also need to understand and recognize that legal professionals within their firms will likely use AI in the workplace. As set out above, this use means that a firm needs policies and procedures. Otherwise, there is a risk that ethical and court rules will not be met.
Understanding what AI can do and the problems it can solve is important to firm resource management. Without this knowledge, firms may end up purchasing expensive AI tools that don’t work or meet firm needs.
Risks of not knowing
In addition to the risks set out above, there is a substantial risk of not knowing the benefits of AI. More and more, clients expect their lawyers to understand AI, both its benefits and risks.
A lawyer who blindly resists AI may lose clients who value efficiency, while a lawyer who misuses AI risks losing trust. The key is to strike a balance — understanding when AI enhances legal work and when it introduces unacceptable risks.
Lawyers and legal professionals also need to anticipate that clients will use AI to inform themselves about their matters and the law. While this knowledge may not always be correct or on point, lawyers need to be prepared for better informed clients.
How to learn more
The need to appreciate AI’s risks and benefits and stay informed may seem overwhelming. Yet, there are a number of resources available.
For lawyers looking to stay ahead of these issues, conferences like the ABA TechShow, for example, are excellent resources. TechShow, which this year will be held April 2-5 in Chicago provides practical insights into AI tools, ethical considerations, and risk management strategies tailored for legal professionals.
Other useful sources include state bar association programs, conferences, CLE courses on AI and ethics, and legal technology blogs that track emerging trends. In addition, vendors often hold their own user conferences and offer learning materials.
AI Is no longer optional
AI is here to stay; lawyers cannot afford to treat it as a passing fad or someone else’s problem. To remain competent and ethically compliant, attorneys must educate themselves on AI’s risks and benefits, develop firm-wide policies for AI use, and ensure ongoing supervision and oversight.
The bottom line? AI can be a powerful ally, but only for those who take the time to understand it. Otherwise, the ethical, professional, and financial risks could outweigh the rewards.
