Artificial intelligence tools, especially chatbots that answer questions in a conversational format, are becoming common on business and government websites. These systems can help users find information quickly and reduce staff workload.
A proposed bill in the New York State Legislature could change how these tools are used and, if adopted, the legislation would create potential legal liability for organizations whose chatbots provide advice that is reserved for licensed professionals.
Because the proposal applies not only to businesses but also to government entities, municipalities that use chatbots to answer questions from residents could be affected.
What the Bill Would Do
The proposed legislation, Senate Bill 7263, would add a new provision to New York’s General Business Law governing chatbot systems.
The bill focuses on situations where a chatbot provides information that would be considered the unauthorized practice of a licensed profession if a human gave the same advice. New York State law already restricts who may practice certain professions, including law, medicine, engineering, architecture, and other licensed fields. If passed, Senate Bill 7263 would be a first-in-the-nation law to establish strict liability for AI operators whose chatbots impersonate licensed professionals or provide unauthorized legal or medical advice.
Under the proposal:
- A “chatbot” is broadly defined as an AI system that simulates human conversation to provide information or services.
- A “proprietor” includes any person, business, organization, institution, or government entity that operates or deploys the chatbot and excludes third-party developers that license their chatbot technology to a proprietor.
- Chatbot proprietors would be prohibited from allowing the system to provide responses that would amount to the unauthorized practice of a licensed profession.
If a chatbot violates the law and a user suffers damages, the user could bring a civil lawsuit. Courts could award actual damages, and in cases involving willful violations, attorneys’ fees and litigation costs.
The bill would also require chatbot proprietors to clearly, conspicuously, and explicitly notify users that they are interacting with an artificial intelligence chatbot program. However, the legislation states that simply telling users they are interacting with a chatbot would not eliminate liability if the system provides prohibited advice.
Areas Where Risk Could Arise
Generative AI tools can produce detailed answers to complex questions. In many cases, the information they provide may resemble guidance traditionally given by licensed professionals.
The proposed bill reflects growing concern that users may rely on AI-generated responses in situations where professional expertise is required. At the same time, policymakers are still grappling with how to regulate rapidly evolving AI technologies.
One challenge is that the line between general information and professional advice is not always clear—especially when a chatbot delivers responses in a conversational format that may appear authoritative.
Organizations using chatbots—both public and private—may want to consider how the proposed law could affect:
- The types of questions a chatbot is allowed to answer
- How the system presents information to users
- Whether responses could be interpreted as professional advice
- When a user should be directed to a human staff member or licensed professional
Because the bill allows lawsuits seeking damages and attorneys’ fees, organizations deploying chatbots may face increased legal exposure if the technology is not carefully designed or monitored.
Potential Impact on Municipalities
The bill’s definition of a “proprietor” includes government entities, which means municipalities using chatbots could be subject to the same rules as private organizations.
Many local governments are beginning to use chatbot tools on their websites to help residents navigate services. These systems may answer common questions about permits, property regulations, or other municipal processes.
If the proposed legislation becomes law, municipalities may need to evaluate whether those systems could inadvertently provide responses that might be interpreted as professional advice. For example, a chatbot responding to detailed questions about building regulations, property requirements, or legal procedures could create risk if users rely on those answers and later experience financial harm.
Even if the information was intended to be general guidance, the conversational nature of chatbot responses may make them appear more definitive than traditional website content.
Looking Ahead
AI technology is developing quickly, and the legal framework governing its use is evolving just as rapidly. Organizations that rely on automated tools to interact with the public may benefit from reviewing how those tools operate in light of emerging regulatory developments.
Legal counsel with experience in municipal law and emerging technology can help organizations:
- evaluate existing chatbot systems for potential compliance issues
- identify areas where chatbot responses could create legal risk
- develop policies governing the use of AI tools in public communications and audit existing policies
- monitor legislative and regulatory developments affecting AI deployment
For municipalities in particular, careful planning may help ensure that new technologies improve public access to information while avoiding unintended legal exposure.
Currently, the bill is advancing through the legislative process and was unanimously passed by the Senate Internet and Technology Committee, but there is still a long way to go before being signed into law. It is highly likely that the bill will undergo changes or reconciliation before reaching the Governor’s desk.
However, even at this early stage, the proposal highlights a growing trend: governments are beginning to examine how traditional professional licensing laws apply to artificial intelligence systems.
Businesses and municipalities that use or are considering using chatbots may want to pay close attention as the regulatory landscape continues to evolve.
How Legal Counsel Can Help
Our firm advises municipalities on a wide range of municipal law issues, including those involving new technologies. We offer special counsel services tomunicipalities on AI/Tech matters, renewable energy issues, complicated zoning and land use projects, and other issues involving emerging technology. In these capacities, we help local governments evaluate legal risks and develop policies that support innovation while protecting the public interest.
As emerging technologies, like artificial intelligence tools, become more common in government operations, thoughtful planning and legal guidance can help municipalities take advantage of these technologies while managing potential liability.
If you have questions about how existing or proposed AI regulations could affect your organization, are considering implementing chatbot technology in municipal services, or have other questions regarding how emerging technology issues may impact legal liability — members of our municipal practice group are available to assist. For assistance, please contact Jacob H. Zoghlin at 585-258-2834 or jzoghlin@underbergkessler.com.
