AI clause for engagement letters: what firms actually wrote
At least one mid-size firm is holding its engagement letter clause until the professional liability carrier signs off, treating the insurer, not the state bar, as the binding governance voice on AI risk. That finding upends the standard story about what the holdouts are waiting for. Of firms that have added AI language to their engagement letters, 45% address billing explicitly. Almost none of them address what happens when the client feeds privileged documents into a public AI tool.
| What mid-size firms report | Share |
|---|---|
| Of firms with active AI language, address billing explicitly | 45% |
The insurer is the real governance authority
Bar guidance is the official reason firms give for waiting. But at least one firm is sitting on its clause until the professional liability carrier signs off first, not the state bar. Carriers have a direct financial stake in how AI use gets disclosed and documented, and they can move the premium when they speak. The bar can only sanction. Firms do not say this out loud because it implies the bar is the secondary authority. The implication is accurate.
Firms covered their own AI use. They left the client side wide open.
Among firms that have active engagement language, 45% address how AI-assisted work is billed. What those same clauses almost never touch is what the client does: feeding attorney communications, privileged documents, or case strategy into a public AI tool. Once that happens, the firm cannot reverse the privilege-waiver exposure it created. The engagement letter is the one place the firm can say something before a matter opens. Most skip it.
Consent by engagement is becoming the default
Firms are not requiring affirmative opt-in. The pattern across these agreements is consent-by-engagement: the client gets a disclosure clause and signing means they accept it. That sidesteps the client-friction concern and matches how firms handle other technology disclosures. The unresolved internal question is whether bar rules in a given jurisdiction actually compel disclosure at all. The firms that did not wait for that answer are the ones whose clauses are now the reference point.
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