State Farm's lawyers submit AI-generated fake case citations in fire claim dispute

In a dispute over the payout for a Carson house fire, State Farm’s outside counsel filed motions that referenced a series of nonexistent judicial decisions. The law firm Musick, Peeler & Garrett disclosed that it relied on the AI platform Irys for research but did not check the accuracy of the generated citations, resulting in what it called “AI hallucinations.” Attorney Jacquelene Robinson apologized to the court, acknowledging a lapse in professional judgment.

The mistake was first identified by plaintiff’s lawyer Michael Shaolian, who is suing State Farm for alleged bad-faith handling of the claim. State Farm’s spokesperson Tom Hartmann said the company is implementing safeguards to prevent similar AI-related errors. The insurer is also under investigation by the California Department of Insurance, which has considered restricting its ability to write policies after numerous consumer complaints.