The Adjuster Was an Algorithm: The Policyholder’s Bad-Faith Case Against AI Claim Handling

Michael S. Levine, Partner | Hunton Andrews Kurth LLP

Mike Levine leads Hunton Andrews Kurth’s property, casualty, and emerging-issues insurance practices on a policyholder-representation basis — a portfolio that expressly includes artificial intelligence and emerging technology risks alongside cyber and media liability, property damage and business interruption, and commercial, professional, corporate and employment liability claims. He has litigated insurance disputes for more than twenty-five years and, since 2005, has represented policyholders exclusively, drawing on earlier years spent representing the insurance industry in high-stakes matters, including property, liability and reconstruction appraisal proceedings arising from the September 11 terrorist attack. He has recovered hundreds of millions of dollars of insurance proceeds for clients.

• Education & Credentials

Mike is a Legal 500 and Chambers USA-ranked lawyer with more than 25 years of experience litigating insurance disputes, and he became a Fellow of the American College of Coverage Counsel in 2021.

• Recognition & Leadership

Chambers USA recognizes Mike as a Leader in Insurance: Policyholder in the District of Columbia (2023–2026) and previously in Insurance in Georgia (2021–2022). Legal 500 United States recommends him for Insurance: Advice to Policyholders (2021–2026), and The Best Lawyers in America has named him Best Lawyer in Insurance Law (2023–2027).

He serves as Editor-in-Chief of Coverage, the journal of the American Bar Association Insurance Coverage Litigation Committee (2022–present), and sits on the Law360 Insurance Authority Property Editorial Advisory Board (2024). He co-chairs the American College of Coverage Counsel Annual Meeting Committee and serves on the Board of Directors of the RIMS Potomac Chapter (2024–present). The Virginia Access to Justice Commission named him to its Commission Pro Bono Service Honor Roll in 2025.

• Professional Involvement

Mike is a prolific writer on insurance coverage for artificial intelligence and emerging technologies. His recent articles include “How Insurance Policies Are Adapting To AI Risk” (July 2025), “Insuring Intellectual Property – Examining AI and Fair Use” (July 2025), and “Artificial Intelligence and Insurance” Parts I and II (June and August 2024). He also writes on cyber insurance and data breach claims, PFAS and environmental liability coverage, D&O issues, supply chain disruption, blockchain and cryptocurrency insurance, and publishes recurring “Year in Review: Top Insurance Cases” surveys (2015–2025).

He frequently serves as a faculty member and lecturer on insurance recovery, insurer bad faith and unfair claims practices, and assessing coverage for new and emerging risks. Recent programs include Artificial Intelligence Risk: Evolving Risk Transfer Landscape (2026); AI Insurance Products and Coverage Issues at PLI Property and Casualty Insurance Law (2025); Artificial Intelligence: Recognition and Risk Management at RIMS RISKWORLD (2025); Insuring AI Risks: From Cybersecurity to Management Liability (2024); Big Tex + AI = Big Risk at the DFW RIMS Fall Conference (2024); and Insurance in the Cyber/AI Era for the D.C. Bar (2024).

Within the ABA Insurance Coverage Litigation Committee he previously co-chaired the Programming Subcommittee (2005–2009) and the Subcommittee on Emerging Coverage Issues (2003–2005), and served as Vice Co-Chair of the Mid-Year Meeting (2003). He belongs to the American Bar Association, the American College of Coverage Counsel, RIMS, and the Association of American Law Schools, and participates in his firm’s Retail, Blockchain, COVID-19, and PFAS working groups.

• Experience

Mike served as lead trial counsel in a lawsuit against an auto dealer’s insurers, obtaining a favorable verdict on property damage, business income loss, and bad faith claims, and successfully resolved an insurance dispute that produced a $32 million jury verdict on the duty to defend. He recovered more than $200 million from liability insurers for a major energy infrastructure company’s losses arising from a petrochemical plant explosion, and $13.7 million for a municipality under a commercial property policy for flood-related damage.

He was trial and appellate counsel in the World Trade Center Properties coverage litigation, obtaining summary judgment and a favorable Second Circuit decision on the “occurrences” analysis, and litigated a major U.S. airline’s September 11 business interruption claim. He has served as national coordinating counsel for welding fume exposure claims and third-party liability coverage, and has litigated toxic mold coverage claims and handgun manufacturing and marketing liability coverage cases.

His current matters include COVID-19 business interruption litigation; advising a major petroleum pipeline company on coverage arising from accidents and environmental incidents; representing a private equity firm in litigation over government investigation defense costs and settlements; counseling a renewable energy company on a cell captive acquisition, fronting arrangement, and reinsurance negotiation; and hurricane and flood loss recoveries for a financial institution, a law firm, a luxury resort, and a national service provider.

Karin S. Aldama, Shareholder | Gallagher & Kennedy

Karin Aldama represents corporate clients and governmental entities in obtaining appropriate insurance coverage and pursuing claims under their policies, for a client base that runs from mid-size companies through the Fortune 500 in hospitality, finance, utilities, aerospace, and semiconductors. She conducts policy audits, reviews proposed policies at renewal, evaluates coverage following losses, navigates the claims process, and handles coverage litigation when a claim does not resolve — across environmental, director and officer, professional and general liability, cyber, property, and business interruption policies. She writes on insurance and artificial intelligence, most recently in “Insurance and AI—Up and Coming Legal Issues in 2026” (February 2026) and “Google Suit Reveals Coverage Challenges for AI Integration” (November 2025).

• Education & Credentials

Karin earned her J.D. summa cum laude from Georgetown University Law Center in 2000, where she was elected to the Order of the Coif, and holds a B.A. with honors in Business Administration and Management from National Louis University (1992). She clerked for the Hon. Frank Schwelb. She is admitted in Arizona (2005) and before the Supreme Court of the United States (2008), the Ninth Circuit (2006), the Tenth Circuit (2002), the District of Arizona (2005), and the District of Columbia (2001). She practices in German, French, and Italian in addition to English.

• Recognition & Leadership

Karin is a Fellow of the American College of Coverage Counsel and has been ranked by Chambers USA in Insurance from 2021 through 2026, where a client comment records simply: “Karin is excellent.” She is a Fellow of the Foundation of the American Bar Association and of the Foundation of the Federal Bar Association, and was named a Higginbotham Diversity Fellow by the American Arbitration Association in 2013.

She is Co-Managing Editor of Coverage, the journal of the American Bar Association Insurance Coverage Litigation Committee (2019–present). Within that committee she has served as Policyholder Co-Chair of the Energy & Environment Subcommittee (2019, 2022–2023) and of the International/London Subcommittee (2016–2019), and as Co-Chair of the Women in Insurance Subcommittee (2015–2016), where she has been a member since 2014. She serves on the statewide Board of Directors of the Arizona Women Lawyers Association (2016–present) as Vice President (2026) and previously Treasurer (2025), and was President of the association’s Maricopa County Chapter (2019–2020) and President of the Phoenix Chapter of the Federal Bar Association (2009–2010).

• Professional Involvement

Karin writes and speaks on insurance and artificial intelligence. Her recent work includes “Insurance and AI—Up and Coming Legal Issues in 2026” (February 13, 2026), “Google Suit Reveals Coverage Challenges for AI Integration” (November 20, 2025), and the presentation “Navigating AI-Driven Change in Insurance” (July 7, 2026). She also authored “Appraisals: Resolving Disputes over Valuing the Amount of Loss, Parts I and II” (June 2025) and “Coverage Issues for Climate Change” for the American Bar Association (2019), served on an ABA CLE panel on insurance fraud (January 22, 2026), and co-authored “Seven Emerging Legal Trends Shaping Arizona Business in 2026” (January 9, 2026).

She served on the Cyber Security Committee of the Arizona Technology Council (2017–2019) and on the Greater Phoenix Chamber of Commerce Public Affairs Committee and its Insurance and Health Care Issue Committee (2016–2019). She taught U.S. Legal Discourse as an adjunct professor at Georgetown University Law Center (2000–2001) and is a member of Treffpunkt, the German-American Business Group. Her board service includes the Florence Immigration Project (2025), Act One (2017–2019, Treasurer 2019), and the Herberger Theater Center (2011–2017).

Her pro bono practice has included pension and reparation claims for Holocaust survivors against the German government, asylum representation for a Mexican human rights defender, a Guatemalan domestic violence victim, and a Sudanese “Lost Boy,” removal relief for a former Guatemalan child soldier, a federal jury trial on civil rights claims against prison officials as lead attorney, and co-counsel work challenging Arizona restrictions on reproductive care access.

• Experience

Karin represented the nation’s largest public utility in securing coverage for cleanup costs associated with the largest coal ash spill in the United States, recovering more than $300 million through settlements and complete victories in two multi-week London arbitrations against Bermuda-based excess liability insurers. She has represented policyholders in complex matters involving environmental, director and officer, professional and general liability, cyber, property, and business interruption policies, with success in London arbitrations under Bermuda Form agreements.

Her other coverage matters include complex litigation for a successor trust following a financial institution bankruptcy; property, business interruption, and environmental coverage for a hospitality company following hurricane damage; construction-related insurance counsel for a township; accident coverage analysis for a clinic facility; and production accident coverage issues for a multinational media and entertainment group.

Alongside her coverage practice she manages complex commercial and appellate litigation and addresses privilege law in international and cross-border contexts. That work includes trade secrets litigation for a leading online real estate portal, patent infringement and antitrust matters for semiconductor companies, antitrust multidistrict litigation for a multinational microprocessor manufacturer, and Foreign Corrupt Practices Act claims for an international mining company. She has appeared before the Fourth and Ninth Circuits, most recently obtaining vacatur of recall and restitution provisions in a trademark infringement preliminary injunction. She spent twenty years at an AmLaw 50 firm and four years at a multinational firm based in Washington, D.C.

SESSION 1 – Turning the Oklahoma AG Suits into a Policyholder Bad-Faith Case | 12:00pm – 1:00pm

Insurance bad faith has always assumed a human adjuster who investigated the claim, evaluated it, and decided it. Insurers now use AI for automated triage, severity scoring, settlement recommendations, fraud detection flags, and claim denials and reductions. This session starts from one premise: an insurer cannot outsource its duty of good faith to a machine, and when an algorithm does the adjuster’s job, the algorithm becomes evidence of how the insurer handled the claim. It uses the Oklahoma AG allegations as a roadmap — that insurers used AI systems to undervalue claims, make settlement offers below fair value, increase claim closure rates, and put profit ahead of accuracy — and explains why a government investigation helps a private case: it creates a factual narrative, makes internal documents discoverable, and identifies industry practices. It then maps that conduct onto the traditional bad-faith elements — unreasonable claim handling, lack of proper investigation, and knowing or reckless disregard of the insured’s interests — through four theories: biased inputs producing a biased investigation, algorithmic undervaluation, institutionalized claims minimization, and failure to supervise the AI. It closes by tracing the decision chain from data ingestion through scoring to the claim outcome, so you can show why a claim was denied, delayed, or underpaid, and by putting the reasonableness of the insurer’s reliance to a jury.

BREAK | 1:00pm – 1:10pm

SESSION 2 – Discovering the Algorithm: Compelling the Insurer’s AI Claim-Handling File | 1:10pm – 2:10pm

Ask for the algorithm and the insurer will call it proprietary technology, a trade secret, or the vendor’s — and say none of it matters because a human made the final decision. This session treats the algorithm as fact evidence rather than technology: it took part in handling the claim, influenced the valuation, and generated recommendations, so it belongs in the claim file. It works from one principle — show me everything that influenced the claim decision — and frames requests in four categories: system architecture, claim-specific AI data, performance validation materials, and corporate knowledge. It sets deposition topics for the four witnesses who matter: claims staff, the data science team, compliance, and the vendor. It answers trade-secret objections by showing the insurer put the algorithm at issue, and by offering attorneys’-eyes-only designation, source-code review protocols, independent expert review, and confidentiality orders, with production limited to the claim. It ends by assembling the AI claims file itself: adjuster notes alongside AI-generated recommendations, risk scores, valuation calculations, automated alerts, override logs, internal appeals, and model-generated communications.