Air Canada chatbot invents bereavement discount policy — tribunal ruling
Date: 2024-02
Affected: Air Canada — customer service chatbot (passenger Jake Moffatt)
Attack vector: hallucination
Category: real-world
Severity: High

A passenger named Jake Moffatt used Air Canada's AI chatbot to ask about bereavement travel discounts after the death of a family member. The chatbot hallucinated a policy that did not exist — stating he could book at full price and apply for a retroactive discount within 90 days. When he followed this advice and was denied the discount, he took Air Canada to the British Columbia Civil Resolution Tribunal. The tribunal ruled that Air Canada was responsible for its chatbot's statements, rejecting the airline's argument that the chatbot was a 'separate legal entity'. Air Canada was ordered to pay the passenger $650.

Impact: Legal liability established — first tribunal ruling holding an organisation legally responsible for AI chatbot hallucinations; financial penalty; reputational damage; legal precedent for operator accountability

Mitigations:
Ground customer-facing chatbots on live, structured policy documents via RAG
Add confidence thresholds — route low-confidence queries to human agents
Fact-check responses against authoritative sources before delivery
Include disclaimer that chatbot responses are not legally binding for policy matters
Operator accountability framework — accept legal responsibility for AI output (EU AI Act Art. 9)

Architectural layers (MAESTRO):
label: Foundation Models
notes: Model hallucinated policy details with high confidence, presenting false information as factual
role: origin
label: Deployment & Infrastructure
notes: Chatbot deployed in customer-facing role without factual grounding or real-time policy retrieval
role: impact
label: Evaluation & Observability
notes: No accuracy monitoring or factual verification layer before responses reached customers
role: blind-spot