AI in Law Firms: Risks, Rewards, and Responsibility – Part 1

Artificial intelligence is rapidly becoming part of everyday law firm operations. While AI can help attorneys save time, improve efficiency, and enhance the client experience, it also introduces serious risks if used without proper oversight.

In this episode, we discuss what attorneys and legal professionals need to know before using AI in a law practice. We explore the benefits of AI, including how it can boost productivity and strengthen law firm systems. We also cover liability concerns such as confidentiality, inaccurate AI-generated content, overreliance, client communication, and professional judgment.

Whether your firm is already using AI or just beginning to explore it, this episode will help you responsibly use AI, protect client data, create internal AI policies, train your team, and minimize risk.

Bottom Line: AI can be a powerful tool for law firms, but only when attorneys remain in control.

ABA Formal Opinion 512

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More Resources:

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FAQs on ChatGPT for Solo and Small Law Firms

Balancing Legal Technology & Human Connection Guide

A Quarterly Mental Reset Guide for Lawyers

 
 
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Transcript

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Welcome to Lawyers Learning Center with DHIA, where we share practical attorney-focused insights to help law firms strengthen their practices, manage risk, and make more informed decisions about professional liability insurance. You'll find related resources in the show notes to help you stay informed in a changing legal and insurance landscape. Now let's dive into today's episode. Artificial intelligence is no longer something law firms can treat as futuristic, experimental, or coming someday. It's here and it's making big changes in the legal industry. AI is showing up in legal research platforms, document drafting tools, client intake systems, discovery tools, billing summaries, marketing platforms, practice management software, and even routine office workflows. And for attorneys, that creates both opportunity and risk. Because AI can absolutely help a law firm work faster, communicate more clearly, reduce administrative burden, and improve the client experience, creating the opportunity for efficiency and growth. But it can also create serious issues if it is used without oversight, without clear policies, or without understanding where the technology fits and where it doesn't. That's what we're talking about today. Using artificial intelligence in your law firm, the benefits, the liability risks, and the practical strategies every attorney should understand before making AI part of their practice. We'll look into how AI can improve law firm efficiency and client service, where it may create ethical, professional, or liability risks, and why it should be treated as a tool, not a substitute for legal judgment. This episode is not about scaring attorneys away from technology. It's about helping attorneys use technology with more confidence, stronger safeguards, and better judgment. The question isn't whether AI is good or bad, it's about whether your firm has the right systems, policies, and oversight in place to use AI responsibly. Let's dive in. Let's start with why this conversation even matters. Well, many attorneys are already under pressure to do more with less. More client communication, more documentation, more deadlines, more administrative work, more pressure to respond quickly and deliver value efficiently. And in a high-pressure environment, AI can look very appealing. Artificial intelligence can summarize large amounts of information quickly, it can help organize ideas, create first drafts, it can help identify patterns, assist with routine client communications, and help streamline internal workflows. And AI can reduce the time spent staring at a blank page. For many firms, especially solo and small law firms, that really matters. Because time is one of the most limited resources in a legal practice. And if AI can help reduce repetitive work, improve organization, or give attorneys a stronger starting point, it can support better productivity and potentially improve the client experience. But here's the important distinction. AI can assist legal work. It cannot replace the attorney's professional responsibility. That distinction is where many of the risks stem from. AI may produce confident answers, but confidence is not accuracy. AI may generate legal sounding language, but legal sounding is not the same as legally correct. AI may summarize a document, but that doesn't mean it captured every important or key part. AI may draft a clause, but that doesn't mean that the clause fits the client's facts, jurisdiction, goals, risk tolerance, or legal strategy. So while AI has the potential to improve efficiency and save valuable time, attorneys still need to remain in control of the work, the advice, and the final judgment. AI produces what it finds, but it only has the context that you provide. And those gaps and potential misunderstandings of information are what still need human review. Now let's talk about the upside, the benefits of AI in law practice. When used carefully and intentionally, AI can help law firms improve systems, reduce bottlenecks, and better serve clients. The first benefit is that AI can help reduce administrative burden. One of the most practical uses of AI in any profession is helping with routine, non-substantive work. For law firms, that may include drafting internal checklists, summarizing non-confidential meeting notes or information, creating first drafts of general client education materials, organizing intake questions, turning long explanations into plain language summaries, or helping staff standardize recurring communications. Notice these uses suggest drafting. That's because the AI output is not automatically ready to use. It needs human review and revision for brand alignment and professional judgment. But it's a starting point. And for a busy law firm, a starting point can save meaningful amounts of time. Instead of beginning from a blank document, the attorney or staff member can refine, review, correct, and customize. That shift may seem small, but over time, it can reduce friction in day-to-day operations. Two, AI can support better client communication. Client communication is one of the biggest drivers of client satisfaction, and one of the biggest sources of frustration when communication falls short. AI can help attorneys explain complex ideas in simpler language. Again, then you only need to review, refine, and confirm accuracy before sending. It can assist with drafting general status update templates, FAQ style resources, onboarding materials, or plain language explanations of a process. For example, a firm might use AI to help create a client-friendly explanation of what to expect during the intake process, what documents the client needs to provide, how billing works, what an upcoming phase of a matter may involve, or how the firm handles routine communication. Clear communication helps clients feel informed, especially when they don't have to decipher legal jargon. And when clients feel informed, they may be less likely to panic, call repeatedly, misunderstand invoices, or feel ignored. Clear, proactive communication goes a long way, and it can improve the client experience, plus reduce unnecessary pressure on the firm. AI can also be useful as a brainstorming or organization tool. For example, an attorney might ask AI to help outline the issues in a presentation, organize a checklist, create a workflow, identify possible categories for a policy, or simplify a dense explanation. Used this way, AI is not making a legal decision. It's helping organize human thinking in record time. That can be especially useful when the attorney already understands the subject matter, but wants help creating structure, clarity, or a more efficient first draft. Another benefit of AI in a law firm is that it can help firms identify patterns in their own processes. AI can quickly spot things like where intake gets delayed, commonly asked questions, or where clients are asking the same question in the process, where staff repeatedly recreate the same documents, where attorneys spend time on work that could be templated or delegated, or where communication could be more consistent or clearer. That is where AI becomes part of a bigger operational conversation and most helpful. Asking not just how can we use this tool, but where is our firm losing time, clarity, consistency, or capacity, and could AI support a better system? That's the opportunity AI offers. Now we need to talk about the risks of using AI. But before we get into specific liability risks, let's take a moment to talk about the most important mindset shift. And that is that AI is an assistant, not the attorney. While that may sound obvious, it needs to be said clearly. AI does not owe duties to the client and doesn't understand the full representation. Nor does AI know the attorney's professional obligations. AI does not replace independent human judgment. It doesn't feel the weight of a deadline, a client's trust, or a court filing. AI cannot be responsible for the final work product. The attorney is still responsible. And that can easily be forgotten in the rush of deadlines and commitments because AI tools can produce answers that sound polished and persuasive. But that polish can be dangerous. An AI output can have obvious gaps that invite review or hidden errors that create false confidence. That is where attorneys need to be especially careful. The risk isn't just that AI may be wrong. The risk is that AI might be wrong in a way that looks or sounds right. So the goal isn't to avoid AI altogether. It is a powerful tool, but just a tool nonetheless. The goal is to build systems that prevent the firm from outsourcing judgment, accuracy, confidentiality, or accountability to a tool. Now the risks. The first major risk is accuracy. Generative AI tools can produce information that's incomplete, misleading, outdated, or entirely fabricated. You've likely heard this as an AI hallucination. That means the system may generate an answer that sounds credible, but it's simply not true. In a legal setting, this can be especially dangerous. A fabricated case citation, an incorrect legal standard, a misquoted rule, a missing exception, a wrong jurisdictional assumption, an outdated statute, or a made-up procedural requirement. Any of those things could create serious consequences if they make their way into submitted legal work or communications. And again, the danger is that the output may sound authoritative, but it's up to the attorney, as a legal professional, to verify AI-generated work before relying on it. Not skim it, not assume it is close enough, not trust it because it sounds right, verify it. That includes checking stated facts, rules, citations, procedural posture, or any legal conclusions. If the AI output will influence legal advice, court filings, client communication, research, or strategy, it needs an attorney's thorough review. An attorney can't delegate their duty and responsibility for legal submissions to AI. The tool performs the initial work for you, but a human, a licensed attorney, must give the final approval. A simple way to think about this is AI can suggest or draft, but the lawyer must verify. The second major risk is confidentiality. This may be the risk many firms underestimate. When attorneys use AI, they need to think carefully about what information is being entered into the tool. That includes prompts, client facts, uploaded documents, emails, contracts, discovery materials, medical records, financial records, litigation strategy, settlement information, or personally identifiable information. The issue is not only what the AI tool produces, but also what the firm puts into it. Some tools may store input, some may use input to improve or train systems, or allow vendor review or process data through third-party systems. It's important to know whether your AI tools provide the level of confidentiality and security appropriate for client information before inputting personal client data. Attorneys cannot assume that every AI tool is safe for confidential client data. No one should. It's crucial to understand how the tool handles information, including its terms of use, privacy policies, data retention practices, whether prompts are stored or used for training, vendor security controls, access permissions, data sharing practices, and whether the tool is designed for professional legal use or general consumer use. The ABA's Formal Opinion 512 guidance emphasizes that lawyers must consider confidentiality obligations when using generative AI, including the duty to protect client information. Some states, like California, get even clearer by restricting lawyers from entering confidential client information into generative AI tools that might pose confidentiality or security risks unless they have informed client consent and require that attorneys take reasonable steps to understand how AI products collect, use, store, and disclose data. The takeaway here is simple. Do not put confidential client information into an AI tool unless you fully understand the confidentiality, security, and consent implications. If you're unsure, pause and double check policies and requirements before uploading. That pause may prevent a major confidentiality problem. The third risk is over-reliance. This happens when attorneys begin treating AI output as the answer rather than a draft, suggestion, or starting point. Over-reliance can show up in subtle ways, like an attorney accepting an AI summary without reading the underlying document. Or maybe a staff member uses AI to respond to a client without attorney review. Maybe a lawyer relies on AI research without independently confirming it. Or the firm allows an AI tool to make recommendations that begin shaping case strategy. This becomes even more important as tools become more autonomous. AI systems that perform tasks or workflows like planning, selecting tools, interacting with external systems, or taking steps without human prompting may not satisfy a lawyer's duty to exercise independent judgment. The more autonomous the tool becomes, the stronger the need for supervision, controls, and review becomes. AI may help identify options, draft communication, organize a workflow, or prepare a filing, but the output should always be reviewed by an attorney because AI should not independently make legal decisions, give legal advice, or decide a legal strategy. A lawyer's professional judgment cannot be delegated to AI. And that should be the core principle in every law firm's AI policy. Next is client communication and consent. Attorneys need to think about when clients should be told that AI is being used. This doesn't necessarily mean that every routine internal use of technology requires a long explanation. But if AI use materially affects the representation, the client's objectives, the handling of confidential information, or the way legal work is being completed, disclosure may be appropriate or even required depending on the circumstances and applicable jurisdictional rules. The ABA guidance identifies communication with clients as one of the professional obligations lawyers must consider when using generative AI. This is where firms should avoid vague or inconsistent practices. A stronger approach may be to address AI thoughtfully in engagement letters, internal policies, or client communications where appropriate. For example, a firm might explain whether AI tools may be used to support administrative or drafting tasks, whether confidential information will or will not be entered into AI systems, how attorney review and supervision will be handled, or address whether the client has any restrictions or preferences regarding AI use. This doesn't have to be overly technical. It just needs to be clear, transparent, and reassuring that final decisions and outputs are still made by the attorney, because clients should understand how their case is being handled and who is providing legal advice. Another major risk is inconsistent AI use throughout a law firm. In many offices, AI adoption doesn't start with a formal rollout. It begins quietly, and most times one person and one task at a time. One attorney uses it to summarize a rough idea, paralegal uses it to draft an email, a legal assistant uses it to clean up a client communication, a junior attorney uses it to research a concept. And suddenly, AI is being used across the law firm, but it's being used without a shared standard. That inconsistency is risky. Because firm leaders or the firm as a whole may not know what tools are being used, what information is being entered, and whether client information is protected, whether outputs are being reviewed, or if so, who is, or whether staff understand ethical requirements and appropriate use. The ABA guidance includes supervision among the ethical duties lawyers should consider when using generative AI, including supervision of employees and agents. And states and counties may have additional policies for AI use that further shape legal obligations for a law practice. This means that AI governance is not just an IT concern, it's a law firm risk management concern. At a minimum, firms should define which AI tools are approved and which are not, and which are prohibited, what information can and cannot be entered, who may use AI and for what tasks, what level of attorney review is required, how AI outputs should be verified, how AI use should be documented, and who is responsible for monitoring changes in the tools. Without an AI policy in place, every person can create their own rules and use any tool they'd like, and that creates exposure. An AI policy with standardized processes and expectations is a risk management strategy. Now let's talk about billing. If AI helps complete the work faster, how should the client be charged? The ABA's formal opinion 512 addresses how the use of generative AI fits within Rule 1.5's requirements for reasonable fees. The opinion states that lawyers may bill for actual time spent prompting an AI tool and reviewing, verifying, and refining its output. However, lawyers may not bill for time saved through AI-generated efficiencies when charging by the hour. Although hourly, flat fee, and other billing methods are still allowed, lawyers must make sure that any fee or expense related to AI use is reasonable, properly disclosed, and complies with relevant jurisdictional rules. We've mentioned the ABA's Formal Opinion 512 a few times in this episode, so we will be sure to link that in the show notes below. So incorrect billing or inadequate disclosures open the firm to risks. For example, if AI helps complete a task in 20 minutes that previously took two hours, the firm needs to think carefully about how that time is billed. For hourly work, the bill should reflect actual time spent. For flat fee or value-based work, the firm should clearly communicate how fees are calculated and what the client is receiving. Clearly and transparently disclosing AI use is crucial, and offering clients a choice about whether AI is used in a matter is proactive and demonstrates a client-focused approach that improves service quality and experience. The main takeaway here is that AI may improve efficiency, but billing still needs to be transparent, reasonable, and consistent with the applicable fee agreement. This is also an opportunity. Firms that use AI responsibly may be able to improve pricing models, offer more predictable fees, or deliver better value, but the billing structure needs to be thought through carefully. Another risk that deserves attention is bias and incomplete context. AI tools generate responses based on patterns and data and in response of what's inputted. That means outputs may reflect incomplete information, outdated assumptions, biased patterns, or a lack of context. In legal work, context matters. The client facts matter. Jurisdiction, the judge, timing, and procedural posture all matter. The client's goals and business relationship matter. All the context of the case matters, and AI might not know or properly weigh those details. A technically correct statement may still be a poor fit for the client. A generic contract clause or general explanation may not properly match the matter. A suggested strategy may ignore business realities or most current legalities. That is why AI output should not be treated as the final answer. It needs human review and professional judgment. Attorneys need to ask, what facts is this response missing? What assumptions are being made? Is this jurisdiction specific? Does this fit the client's goals and meet expectations? Could this output create unintended risk? What would I change based on my professional judgment? The bottom line is that AI can help create options, but attorneys need to decide what is appropriate, accurate, and the best course forward. Again, legal expertise cannot be delegated to AI. AI is a tool to increase efficiency in a law practice. It's not a replacement for an attorney's responsibilities, services, or judgment. Since this is such an extensive topic, we are breaking this episode into two parts. Today we covered why AI is becoming hard to ignore in law firms, the practical benefits of AI, and the biggest mindset shift that AI is an assistant, not an attorney. We also covered seven key liability risks of using AI in a law practice. Tune in next week and we will share eight practical strategies for implementing AI in your law practice responsibly, along with a simple AI risk management framework for law firms and signs that your firm may need a stronger AI policy. Thank you for listening to Lawyers Learning Center with DHIA. We hope today's episode provided you with useful ideas and insights to strengthen your practice, serve your clients effectively, and manage risks with greater confidence. If you found this episode helpful, subscribe, share it with a colleague, or leave a review so more legal professionals can find the show. For more resources related to today's topic, visit the links in the show notes or go to dhia.comslaspodcast. Until next time, keep learning, keep growing, and keep moving your practice forward.