Dunn v Upstart Holdings, Inc Underscores AI-Related D&O Risks

The securities class action suit Dunn v. Upstart Holdings, Inc., filed in April 2026, argues that Upstart misled investors about the performance of its AI loan underwriting model, leading to significant stock declines.
The lawsuit highlights the emerging Directors and Officers (D&O) insurance risks associated with artificial intelligence in corporate operations.
Company executives face potential new exposures if AI algorithms malfunction or generate biased outcomes.
D&O policies may offer coverage for defense and, possibly, liability in securities suits involving misrepresentations about AI systems.
Insurers are increasingly incorporating AI exclusions or sublimits into policies to mitigate the unpredictable liabilities associated with opaque AI models.
Companies are advised to review their D&O and Errors & Omissions (E&O) coverage to ensure there is clarity regarding AI-related claims.
Robust disclosures regarding AI capabilities are crucial to avoid investor suits and regulatory scrutiny, which could implicate professional liability coverage.
As companies integrate AI, risk managers should ensure their policies cover claims arising from algorithm failures, data bias, and cyber incidents tied to AI. Upstart’s experience is a warning for all policyholders to proactively manage AI risks and secure appropriate coverage.

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