Insuring Uninsurable Risks from AI: The State as Insurer of Last Resort

Many experts believe AI systems will, sooner or later, pose uninsurable risks, including existential risks (Grace et al., 2024; Bengio et al., 2024). If so, it will be impossible to hold accountable the parties liable for such harms (or their insurers). Weil (2024) proposes to solve this extreme judgment proof-problem by assigning punitive damages to harms that are correlated with uninsurable risks (where the correlation would be estimated by courts and juries). While of interest, this solution has several problems. First, is it's novelty: this would be an unprecedented application of punitive damages that may violate the Due Process Clause (2024, 40-44, 50-53), requiring a major doctrinal shift that would cut across all of tort law. Second, correlates of uninsurable risks might be difficult to find. Third, given the high uncertainty involved, correlation estimations by courts will likely be ad hoc, high variance, and fail to leverage all available information. Fourth and finally, punitive damages for correlated risks will send a very oblique and noisy signal to liable parties: its effectiveness at actually inducing greater care taken is doubtful. Liable parties might find powerful legal teams to be a safer investment than investments in safety.