Loss trends and emerging risks in 2025: Management liability

As accountability in corporate leadership continues to broaden across a wider range of issues, legal challenges remain a significant concern for businesses. In Sovereign Insurance’s annual Q&A series, Eduard Lecker, Senior Underwriter,  Management Liability, shares his insights on key loss trends and exposures in this area in 2024 and what organizations should be aware of in 2025 as new risks take shape. 

What were the key loss trends and exposures you saw in 2024?

The key loss trend in 2024 remained consistent with the previous year: an increasing number of claims focused on environmental, social and governance (ESG).¹ These legal actions—which can be initiated by consumers, shareholders and investors, and environmental advocacy groups—are typically centred on allegations related to greenwashing and climate change. For example, a company might make misleading claims about its environmental strategies or fail to disclose climate-related risks, which can expose them to significant legal and financial risks. 

What are some emerging risks to keep an eye out for in 2025? 

One emerging risk is claims related to artificial intelligence (AI). As more companies use AI, there’s a growing risk of misrepresentation about what these systems can do. Some tech companies may overstate AI’s capabilities. Companies using AI for hiring, financial reporting, or ESG decision-making are especially vulnerable, as they could face legal action if the technology doesn’t live up to expectations. For example, AI systems that filter job applicants can have unintentional biases, and companies may claim that AI can replace human decision-making—when, in reality, there’s still a lot of human oversight involved. If AI tools generate inaccurate reports—like pulling up the wrong numbers—and those figures influence critical decision-making, legal claims can arise. Similarly, when companies use AI to track their environmental impact, inaccurate data could also expose them to risk.

There are a couple of emerging issues in the U.S. to keep an eye on, as developments there often follow suit in Canada. Under the new U.S.  leadership, there are rollbacks in climate policies and diversity, equity and inclusion initiatives. For example, the U.S. has pulled out of the Paris climate agreement, which could prompt companies to scale back their own sustainability effects. This could expose them to legal challenges from groups that feel misled by these changes. 

With the current trade war between the U.S. and Canada, there’s growing sentiment around ‘Buy Canadian,” but labelling what qualifies as Canadian-made is complicated. For instance, a product might contain American apples processed in Canada but is labelled as being made in Canada. If a product doesn’t meet legal definitions of terms like ‘Product of Canada’ or ‘Made in Canada,’ this could lead to claims.   For example, if incorrect labels lead to misrepresentation of a product or its origin, it could lead to claims of misrepresentation or breach of contract. 

We’re also keeping an eye on U.S. cases in which directors and officers are facing personal liability in lawsuits. Holding directors personally liable for their decisions could lead to more legal challenges and impact decision-making at the top level.  

How can organizations mitigate these risks? 

For AI, it really comes down to transparency. Don’t overstate, misrepresent, or overpromise what AI can do, and understand the legal consequences of any claims you make. It’s similar to how companies should approach environmental strategies—be transparent about your actions and results. Like the saying goes, ‘understate, overperform.’

For the developments that we’re watching in the U.S., it’s difficult to say how to mitigate against them because there are still a lot of unknowns. When it comes to labelling Canadian products, it’s important to be aware of the legal requirements. Transparency is key here, too—if there’s any uncertainty, you can direct customers to your website where you outline your process, which some companies are starting to do. If you’re not misrepresenting your actions, you’re far less likely to face legal issues. 

Sources
¹ Jan. 31, 2025: Moodys, “D&O series – Evolving risks in the boardroom: A new era of D&O liability – Part 3”
¹ Aug. 22, 2024: McCarthy Tetrault “Greenwashing and AI Washing: Emerging Trends in D&O Claims Across North America”
¹ Oct. 22, 2024: “The Insurer: Greenhushing – An emerging D&O liability?”