Artificial intelligence is emerging as a new source of legal and financial pressure for British companies, according to a new study by Irwin Mitchell. More than a third of them are now reporting an increase in low-value claims generated using AI tools, according to a new study by Irwin Mitchell.
The study, which is based on a survey of more than 80 experienced corporate lawyers, shows how AI is reshaping the process landscape and brings not only new efficiency gains, but also new risks. Companies say AI-generated claims increase legal workload, take up senior management time and drive up costs at a time when many companies are already operating on tight margins.
Around 35% of in-house legal teams reported an increase in claims, particularly from clients using AI tools to create lengthy, highly structured legal arguments. Although many of these claims lack substantive merit, they are often so sophisticated that they require detailed consideration and a formal response.
Katie Byrne, head of commercial dispute resolution at Irwin Mitchell, said these lawsuits were rarely successful but still placed a significant burden on businesses.
“Internal teams are dealing with a growing volume of AI-generated, low-quality claims. Many of them are lengthy, legalistic and template-based. Companies say they rarely act on them, but they still consume time and budget and drive higher spending on cyber coverage and claims processing,” she said.
The result is increasing administrative and legal conflict, particularly for medium-sized companies without extensive internal legal resources.
In addition to the increase in AI-generated claims, the research highlights a broader shift in legal risk priorities. Data protection and privacy breaches are now seen as the biggest threat to AI-related litigation by 55% of respondents.
The costs of cyber insurance are also rising sharply. Nearly 70% of companies reported higher premiums, while two-thirds said they were either expanding their cyber protection or reassessing their liability limits in response to evolving threats.
This reflects growing concern at board level that while AI improves productivity, it also introduces new vectors for data leaks, misuse and compliance violations.
Despite the challenges, companies are increasingly using AI themselves to manage the increasing complexity of disputes. The research found that 64% of legal teams are already using AI tools to support litigation operations, particularly in areas such as document review, disclosure and early case assessment.
More than half (51%) have also adopted internal governance frameworks to regulate the use of AI in legal processes, reflecting a growing emphasis on responsible use.
Byrne said the response from leading companies is not to oppose AI, but to strategically integrate it.
“Boards shouldn’t panic – they should prepare. The immediate priorities we see are clear governance for AI use, employee training to prevent data leaks, and practical triage to separate credible claims from AI-powered complaints,” she said.
The results suggest a wider evolution in the way UK companies view legal risk. Litigation is increasingly viewed as an operational necessity rather than a reactive last resort, with 69% of respondents describing it as a strategic investment.
This change is being driven by a combination of factors, including increasing cyber threats, regulatory complexity and supply chain disruptions. Cyber-related risks were cited most frequently (35%), followed by supply chain issues (21%) and regulatory divergences (17%).
Environmental and greenwashing claims are also gaining traction, cited by 33% of respondents as the biggest ESG-related legal risk.
The report also highlights the mixed acceptance of alternative litigation funding. While just over half of companies use it occasionally, concerns about cost, complexity and loss of control continue to limit wider adoption.
Looking forward, the intersection between AI and legal risks is expected to intensify. As generative tools become more accessible, the volume of automated claims will likely continue to increase, forcing organizations to invest more heavily in defensive and operational capabilities.
For UK businesses already struggling with economic uncertainty, the emergence of AI-driven litigation represents a further layer of cost and complexity, requiring a more sophisticated, technology-enabled approach to legal risk management.
