Attorney Spotlight When she joined Alston & Bird in 2024, after serving as an influential regulator of the New York financial services and insurance sectors for four years, Mona Bhalla brought with her more than 30 years of combined government and private sector experience. Two years later, Mona begins an exciting new chapter in private practice free of restrictions as a former insurance regulator. She now has latitude to bring a broad and multidisciplinary perspective to clients navigating complex New York regulatory, litigation, transactional, securities, and governance matters. Her extensive experience and insights continue to inform her advice to a range of organizations, including global, national, and regional re/ insurance companies. While at the New York State Department of Financial Services (NYDFS), Mona served as deputy superintendent for the Life Bureau, overseeing 650 regulated entities and managing 130 professionals who regulate the New York life insurance industry. Mona established standards for financial solvency, market conduct, and corporate oversight, as well as ensured compliance through regulations and monitoring. Now she’s ready to put her extensive experience to work for you. n Mona Bhalla Partner, Litigation & Trial Practice 2 A Note from the Insurance Team AI is everywhere—impacting business functions, litigation, and even court chambers. In this edition, we unpack what regulators signaled about AI at the NAIC Spring National Meeting, navigate privilege and ethical issues when AI enters the litigation arena, and report on AI trends in the insurance industry. We also highlight key coverage and class action rulings from the past quarter. Finally, we spotlight patent opportunities in insurance technology. - Alston & Bird Insurance Team Key AI Takeaways from the NAIC 2026 Spring National Meeting Did you miss the National Association of Insurance Commissioners’ Spring National Meeting March 22–25 in San Diego? Our team noted several takeaways from the Innovation, Cybersecurity, and Technology Committee and its working groups’ discussion on AI use: Increased Focus on Third-Party AI and Data Oversight. The NAIC is advancing a proposal to create a registry for vendors that provide AI models and datasets to insurers. The registry is intended to give regulators greater visibility into the third-party models and datasets used by insurers and to promote appropriate vendor governance practices. The registry reflects heightened regulatory focus on third-party AI governance. AI Evaluation Pilot Programs Underway. Several states have launched, or are expected to launch, pilot programs using an NAIC-developed tool to assess insurers’ use of AI. The tool focuses on high-risk use cases and evaluates governance practices. Participating insurers have been selected based on factors such as market share, lines of business, and anticipated AI reliance, with most pilots to date involving property and casualty and life insurers. The NAIC plans to refine the tool based on pilot results and consider formal adoption at the Fall National Meeting. Operationalizing the NAIC AI Model Bulletin. A presentation by the NAIC’s senior behavioral data scientist and actuary addressed operationalizing the NAIC AI Model Bulletin. The discussion highlighted governance best practices, including cross-functional AI governance committees, enterprise AI inventories, third‑party risk management, and pilot testing before scaling AI systems. Agentic AI in Insurance. A presentation on insurers’ use of agentic AI highlighted wide variation in AI maturity across the industry and elevated risks associated with agentic systems. Key challenges included accountability gaps, cascading errors across agents, and data and technology limitations. The panel discussed mitigation strategies such as enhanced monitoring, clearer accountability frameworks, updated governance structures, and human-in-theloop escalation for high-risk use cases. A further report on the Spring National Meeting is available at Alstonprivacy.com. n Is Your Secret Safe with AI? United States v. Heppner, No. 1:25-cr-00503 (S.D.N.Y. Feb. 17, 2026). Warner v. Gilbarco Inc., No. 2:24-cv-12333 (E.D. Mich. Feb. 10, 2026). Two federal courts reached different conclusions on “a question of first impression nationwide”: whether AIgenerated materials retain privilege protections. 3 In Heppner, a criminal defendant anticipating indictment on securities fraud charges used generative AI to organize facts and generate reports outlining legal strategy, which he then shared with counsel to inform his defense. Judge Rakoff of the Southern District of New York held that the attorney-client communication privilege was waived because the public AI tool was effectively a third party that by its privacy policy carried no reasonable expectation of confidentiality. The chats also failed to meet the standard for attorney work product because they weren’t created at counsel’s direction. In Warner, a pro se civil litigant used a public AI tool to prepare litigation materials. Judge Patti of the Eastern District of Michigan reasoned that generative AI programs “are tools, not persons.”The materials were protected work product because they were prepared in anticipation of litigation. That status was not waived by disclosure to the AI program because waiver would require disclosure“to an adversary or in a way likely to get in an adversary’s hand.” Despite disagreement about whether AI is like a person, the two holdings are reconcilable. The pro se plaintiff’s materials met the test for work product, and disclosure to a public AI tool did not rise to the more rigid waiver standard for work product. It is unclear whether the judges would agree on whether disclosure to public AI tools can waive the attorney-client communication privilege. n Up to Date on Your AI Ethics? You’ve heard the cautionary tales of attorneys sanctioned for submitting briefs riddled with AI-hallucinated case citations. And AI-related questions have quickly become routine in litigation, from determining whether to tell opposing counsel about AI use in discovery to assessing challenges to an opposing party’s expert reports or evidence that relied on AI. But did you know that the American Bar Association (ABA) issuedformalguidanceonlawyers’ethicalobligationswhen using generative AI, and several states’ ethics committees have followed suit? Beyond the familiar warnings to check citations and exercise care with confidential information, the guidance is not always uniform: All About AI “This is an important and dynamic time to serve as a strategic adviser, regulatory advocate, and thought leader to sophisticated re/insurance companies, trade associations, private investment firms, and other key players in the market.” – Mona
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