Air Canada held liable for chatbot's invented bereavement-fare policy
What happened
Air Canada's website chatbot told a passenger he could book full-fare flights to his grandmother's funeral and claim a bereavement discount retroactively — contradicting actual policy. When the airline refused the refund, the British Columbia Civil Resolution Tribunal rejected Air Canada's argument that the chatbot was 'a separate legal entity responsible for its own actions' and found negligent misrepresentation (Moffatt v. Air Canada, 2024 BCCRT 149).
Impact
Air Canada was ordered to pay CAD $812 — and the ruling set the widely cited precedent that companies are legally liable for what their AI chatbots say.
How this could have been prevented
Grounding customer-facing chatbots strictly in verified policy documents, with hallucination detection on policy answers, prevents the misrepresentation.
Sources
More hallucination incidents
Would runtime governance have caught this?
Guardion enforces policy on every agent action inline — with visibility, tamper-evident evidence, and DLP for agents and MCPs.
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