Why It Matters

A recent Congressional Research Service (CRS) report on AI in health examining state-level artificial intelligence liability frameworks in health care reveals a fundamental mismatch between existing law and emerging harms. Most litigation over AI-related health injuries unfolds in state courts under state law rather than federal statutes, yet no uniform national framework governs these disputes. The Trump administration has signaled its intent to impose a national standard through executive action, including an effort to challenge state AI laws deemed inconsistent with federal policy, setting up a collision between state experimentation and federal preemption.

The Big Picture

Health insurers are automating prior authorization and post-service claims review using AI tools. Plaintiffs in multiple lawsuits allege that insurers deployed algorithms to deny batches of claims without meaningful physician review. In cases like Estate of Barrows v. Humana and Kisting-Leung v. Cigna, coverage determinations made through AI systems are now being litigated.

Beyond insurance, consumer-facing applications face legal pressure. A skin assessment app called Skin360 was challenged under Illinois's Biometric Information Privacy Act (BIPA), temperature screening kiosks with facial recognition drew litigation, and a general-purpose chatbot application designed to interact with minors on mental health topics prompted claims of unsafe design in Garcia v. Character Technologies, Inc.

Historically, courts treated software as a service or declined to impose liability, citing First Amendment concerns. More recently, some courts have held that software qualifies as a product when it is proprietary in design, mass-marketed in the stream of commerce, and causes alleged harm based on design elements the developer controls. In the Character Technologies case, the court found the AI chatbot was a product regarding design defects, such as lack of age verification, while dismissing claims based on the chatbot's expressions. That same court found Google could face liability as a component part manufacturer because its large language model was integrated into the chatbot.

Courts have allowed BIPA claims to proceed in the Skin360 and temperature kiosk cases. Plaintiffs have also invoked state consumer protection laws known as Unfair and Deceptive Acts and Practices (UDAP) statutes, which every state has enacted. However, federal preemption presents an obstacle: courts have found that the Medicare statute's express preemption provision preempts state UDAP claims against Medicare Advantage plans. A district court concluded that the Employee Retirement Income Security Act (ERISA), which includes a preemption provision with a savings clause, did not preempt similar state UDAP claims against private health insurers.

Political Stakes

For Congress

State legislatures are enacting targeted measures on AI in mental health, coverage determinations, and companion chatbots. Arizona H.B. 2175 exemplifies state legislation on AI in coverage determinations. S. 5117, the Senior Chatbot Protection Act of 2026, would regulate general-use chatbots for senior users while preserving state protective laws.

For the Public

Existing state liability frameworks remain unresolved and inadequate. Most health-related AI litigation is in early stages with no merit findings yet, leaving unclear whether state law can provide adequate remedies to injured consumers. The CRS report highlights a gap between existing state tort law and the novel characteristics of AI, including its iterative, learning nature.

What's Next

The Trump administration's Executive Order directs the Attorney General to establish an AI Litigation Task Force to challenge state AI laws inconsistent with the national policy. The executive order is oriented toward a "minimally burdensome national policy framework for AI" to sustain U.S. global AI dominance, while excluding child safety protections from its preemption push.

The Bottom Line

State AI health liability law remains fragmented and inadequate to address emerging harms. As federal preemption efforts reshape the legal landscape, the stakes for consumers, insurers, and state regulators will intensify. The coming months will reveal whether Congress acts to establish baseline protections, whether courts uphold state laws against federal challenge, or whether a patchwork of competing standards persists. The resolution will determine whether injured patients have meaningful recourse and whether states retain authority to protect their residents from AI-driven health harms.

Access the Legis1 platform for comprehensive political news, data, and insights.

Spot something wrong? Report an issue with this article