Artificial intelligence is no longer a remote technology issue for lawyers, judges, or business clients. It is now part of the daily operating environment for companies that draft contracts, manage employees, negotiate transactions, respond to litigation, protect confidential information, and make decisions based on large volumes of data. The State Bar of Michigan’s report on artificial intelligence in the legal profession recognizes this reality and treats AI not as a passing trend, but as a structural change in how legal services are delivered and how the public interacts with the legal system. For business clients, the report matters because it signals that Michigan lawyers are expected to understand AI, use it responsibly where appropriate, and protect clients from the risks that arise when new tools are adopted without adequate oversight. ¹
The report’s central message is balanced. AI can increase efficiency, improve access to legal information, reduce administrative burdens, and help lawyers analyze documents and legal issues more quickly. At the same time, AI can create serious risks involving confidentiality, accuracy, professional judgment, bias, supervision, fees, and the unauthorized practice of law. ¹ Business clients should understand both sides of that message. A company does not benefit merely because its law firm uses a faster tool. It benefits when the lawyer uses technology in a way that is competent, secure, transparent where required, and consistent with the lawyer’s professional obligations. The report therefore should be read as a guide to responsible adoption rather than as an endorsement of unrestricted AI use.
For corporate clients, the most immediate implication is that legal technology decisions are becoming legal-risk decisions. A business may use AI internally for contract review, employee communications, regulatory monitoring, marketing, customer service, litigation preparation, or document management. Its outside counsel may also use AI for research, drafting, due diligence, e-discovery, and workflow management. In both settings, the question is not simply whether the tool produces a useful answer. The question is whether the tool is appropriate for the task, whether confidential or privileged information is protected, whether the output has been verified, and whether a qualified human remains responsible for the final legal judgment. The State Bar’s report makes clear that lawyers cannot treat AI output as a substitute for professional responsibility. ¹
One of the most important parts of the report is its discussion of technological competence. Michigan’s ethics guidance recognizes that lawyers must understand the benefits and limitations of the tools they use for clients. ² This does not mean every lawyer must become a software engineer or data scientist. It does mean that a lawyer who uses AI should understand enough about the tool to evaluate its reliability, its security posture, its limitations, and the risks of using it in a particular matter. For business clients, that expectation creates a new basis for evaluating counsel. When a company asks whether its lawyer is “using AI,” the better question is whether the lawyer has a process for using AI responsibly.
Competence also affects how lawyers advise companies that are adopting AI within their own operations. A business may be tempted to deploy a general-purpose AI tool across departments because it appears efficient and inexpensive. However, legal review should address the specific context in which the tool will be used. A tool that is acceptable for summarizing public information may be inappropriate for privileged communications, trade secrets, human resources investigations, regulated financial decisions, or customer data. Lawyers advising business clients should be able to identify these distinctions and explain them in practical terms. The State Bar’s report places AI within the broader duty to adapt legal practice to changing technology while preserving the integrity of client
service. ¹
Confidentiality is likely the issue business clients will care about most. Companies routinely share with counsel sensitive commercial information, including pricing models, acquisition plans, employment records, intellectual property, litigation strategy, customer data, financial projections, and internal investigations. If that information is placed into an AI tool without adequate safeguards, the company may face risks involving privilege, trade secret protection, contractual confidentiality obligations, privacy laws, and reputational harm. Michigan ethics guidance states that client consent may be required when the use of an AI program could expose confidential information. ² That principle should be treated seriously by lawyers and clients alike.
The confidentiality issue is not limited to obvious uploads of documents. It can also arise through prompts, summaries, metadata, embedded files, chat histories, account settings, integrations, and vendor-retention policies. A lawyer who pastes a litigation strategy into a public AI chatbot may create one kind of risk. A company that connects an AI assistant to internal email, customer records, or contract databases may create another. Business clients should expect their lawyers to ask practical questions about where information goes, who can access it, whether it is retained, whether it is used to train models, whether it can be deleted, and whether the vendor contract provides meaningful protections. Those questions are not technical formalities. They are now part of legal risk management.
Accuracy is another core concern. Generative AI can produce fluent language that appears authoritative even when it is wrong. In legal work, that risk is especially dangerous because an incorrect citation, misstatement of law, or fabricated authority can damage a case, mislead a client, or expose counsel to sanctions. The State Bar’s report notes the need for lawyers to remain responsible for the quality and accuracy of AI-assisted work. ¹ The American Bar Association has similarly emphasized that lawyers using generative AI must consider duties of competence, confidentiality, communication, supervision, candor, and reasonable fees.⁴ For business clients, this means AI should not be viewed as a shortcut around verification. It is a tool that may accelerate work, but it does not excuse carelessness.
This point has practical consequences for litigation. If outside counsel uses AI to assist with briefing, discovery responses, deposition preparation, document review, or case analysis, the lawyer must still verify the output. If a company uses AI internally to search records or summarize facts before producing them to counsel, the company should understand the limits of that search and summary process. AI may miss context, misread sarcasm, confuse entities, overlook privilege, or produce summaries that omit legally significant details. The safer approach is to treat AI-generated work product as a draft, aid, or analytical starting point, not as the final legal answer.
The report also matters because it addresses practice management. AI can help lawyers automate routine tasks, organize documents, review contracts, identify patterns in discovery, draft preliminary language, and manage client communications. ¹ Business clients may reasonably expect these tools to improve efficiency and reduce unnecessary cost. However, efficiency must be paired with accountability. A law firm should not charge a client for hours that were not reasonably spent, and it should not treat AI-related overhead as a special client expense unless the engagement terms and circumstances justify that charge. The State Bar’s AI FAQs recognize that absent advance disclosure, routine AI tool expenses may be treated as overhead, while matter-specific AI vendor costs may be billed if agreed to and reasonable. ²
This fee issue is significant for businesses that use outside counsel at scale. Companies should consider whether their engagement letters address AI-assisted work, technology expenses, billing practices, and disclosure expectations. A business client may want to know whether AI use will reduce time billed, whether any AI-related vendor costs will be passed through, whether the law firm has internal policies for AI use, and whether the client can restrict or approve certain uses. These conversations should occur before a dispute arises over an invoice or before confidential information is entered into a tool. Thoughtful engagement terms can protect both the client and the lawyer.
The duty of communication also deserves attention. Michigan guidance does not impose a universal duty to tell a client every time a lawyer uses an AI program, but disclosure may be required when the use implicates professional-conduct obligations, such as confidentiality. ² From a business perspective, the best practice may often be more transparent than the minimum rule. A company that is highly regulated, publicly traded, involved in sensitive litigation, or handling confidential transaction data may reasonably ask its counsel to disclose whether and how AI tools will be used. That does not mean every spell-checking or grammar tool requires client approval. It means material uses of AI that affect confidentiality, strategy, cost, or substantive legal analysis should be addressed clearly.
The report also raises the issue of supervision. Law firms have long supervised associates, paralegals, vendors, and nonlawyer assistants. AI adds a new layer to that responsibility. Lawyers must supervise not only the people who use the tool but also the process by which the tool is selected, configured, reviewed, and checked. ³ A business client should therefore be wary of any legal provider that describes AI as though it operates independently of human responsibility. The lawyer remains responsible for the representation. AI may help produce a draft, summarize a record, or identify an issue, but the lawyer must decide whether the result is accurate, appropriate, and in the client’s best interest.
For in-house legal departments, the supervision issue is equally important. Corporate legal teams may allow business units to use AI for contract intake, policy summaries, compliance questions, or employee-facing guidance. If those systems are not supervised, employees may rely on incorrect legal information or create records that later become problematic in litigation. An in-house department should consider setting policies that distinguish between acceptable and prohibited uses, define who may input confidential information, require verification of legal conclusions, and preserve records needed for audits or disputes. The State Bar report’s focus on responsible use provides a useful framework for these internal governance decisions. ¹
Unauthorized practice of law is another major theme. The report recognizes that AI tools can generate documents, analyze contracts, and provide legal-sounding guidance in ways that may blur the line between legal information and legal
advice. ¹ This matters for business clients because companies may be tempted to rely on AI tools for employment decisions, compliance interpretations, contract negotiation positions, or litigation strategy without involving counsel. While AI may provide useful general information, it cannot understand the full legal, commercial, factual, and jurisdictional context in the same way a lawyer can. A tool may generate confident language, but confidence is not the same as legal judgment.
The unauthorized-practice issue is especially important for small and mid-sized businesses that are cost-conscious. AI may appear to offer a low-cost alternative to legal counsel, particularly for routine contracts, demand letters, policies, or regulatory questions. The risk is that a document may look polished while failing to address enforceability, Michigan law, industry-specific regulation, factual nuance, or litigation consequences. The State Bar’s report does not suggest that businesses should ignore AI. Rather, it suggests that AI should be used in a way that preserves the role of qualified legal advice when legal rights and obligations are at stake. ¹
Business clients should also understand the report’s access-to-justice discussion in a commercial context. The report notes that AI may help expand access to legal information and services, particularly where traditional legal resources are
limited. ¹ Although that discussion often focuses on individuals and underserved communities, it also has implications for smaller businesses. Many entrepreneurs and closely held companies face legal needs that are too complex to ignore but too costly to handle through traditional full-service representation. AI-assisted workflows may allow lawyers to provide more efficient, limited-scope, or lower-cost services. The opportunity is real, but it depends on lawyers maintaining oversight and clients understanding what the technology can and cannot do.
The Michigan Judicial Council’s work on generative AI and the courts reinforces the same broader point. Courts are studying AI because it affects court operations, risk awareness, ethics, professional responsibility, access to justice, and the rule of law.⁵ For business litigants, this means AI will increasingly shape not only law-firm operations but also court administration and litigation practice. Companies involved in disputes should expect AI-related questions to arise in discovery, evidentiary disputes, protective orders, expert analysis, sanctions motions, and case management. The business that has already adopted an AI governance framework will be better prepared than the business that treats AI as an informal convenience.
Discovery is one area where business clients should be particularly cautious. AI systems may create new categories of discoverable material, including prompts, outputs, audit logs, training data, internal evaluations, and decision records. If AI is used to analyze documents, make employment recommendations, evaluate claims, monitor communications, or generate business decisions, those records may become relevant in litigation. Counsel should help clients understand how AI systems preserve information, whether outputs are stored, whether users can delete histories, and whether legal holds cover AI-generated or AI-processed materials. Good AI governance is therefore also good litigation readiness.
Contracting is another area where the State Bar report has practical consequences. Businesses increasingly contract with vendors that provide AI-enabled services. Those agreements should address confidentiality, data use, model training, security, ownership of outputs, indemnity, audit rights, service levels, compliance with law, and termination assistance. A vendor’s marketing claims should not substitute for contractual protections. Lawyers advising business clients should be prepared to review whether the contract allows the vendor to use company data to improve its models, whether data is shared with subprocessors, whether outputs are warranted for any purpose, and whether the vendor accepts responsibility for errors or infringement claims. AI adoption without contract review may create hidden exposure.
Intellectual property also deserves attention. AI tools can generate text, images, code, product descriptions, policies, and marketing content. Businesses may assume they own everything produced by the tool, but ownership and infringement questions can be more complicated. Counsel should evaluate whether AI-generated material can be protected, whether it may resemble third-party content, whether it incorporates confidential inputs, and whether the company’s employees are using AI in ways that conflict with customer contracts or internal policies. The State Bar report notes that the legal profession must remain alert to evolving issues as AI develops. ¹ For business clients, that means legal review should continue after implementation rather than ending when the tool is purchased.
Employment and human resources uses of AI create additional risks. Companies may use AI to screen applicants, draft performance reviews, monitor productivity, summarize workplace complaints, or analyze employee communications. These uses can implicate discrimination, privacy, wage-and-hour, disability accommodation, labor, and recordkeeping issues. Even when a vendor describes a tool as neutral, the company may remain responsible for how the tool affects employees or applicants. A lawyer’s role is to help the business ask whether the tool has been tested, whether its criteria are lawful, whether humans can override results, whether affected individuals receive required notices, and whether the company can explain decisions if challenged.
Regulated industries should be especially careful. Health care, finance, insurance, legal services, real estate, manufacturing, and professional services may face industry-specific rules involving data, advertising, records, confidentiality, consumer protection, or fiduciary duties. An AI tool that is acceptable in one setting may be unsuitable in another. The State Bar report’s broader emphasis on competence and responsible use should encourage business lawyers to tailor advice to the client’s industry. ¹ A generic AI policy may not be enough for a company that handles protected health information, consumer financial data, export-controlled technology, or sensitive personal information.
The report also has implications for corporate compliance. A company that adopts AI without clear policies may create inconsistent practices across departments. One employee may use a public tool to summarize a confidential contract. Another may use AI to draft a customer notice. A third may rely on AI to interpret a regulation. Without governance, the company may not know what tools are being used, what information is being entered, or what decisions are being influenced. Lawyers can help businesses build policies that define approved tools, prohibited inputs, review requirements, vendor standards, training expectations, and escalation procedures. This is not bureaucracy for its own sake. It is a way to make AI useful without allowing it to become an unmanaged source of risk.
Business clients should also consider whether their outside counsel’s AI practices align with the company’s own policies. A company may prohibit employees from entering confidential information into public AI tools, yet its outside law firm may use tools that process client documents unless the engagement agreement says otherwise. Conversely, a law firm may have strict AI controls while the client’s employees use unsupervised tools before sending materials to counsel. A mature approach requires coordination. The client and counsel should understand each other’s standards for confidentiality, approval, recordkeeping, and review.
One practical result of the State Bar report is that businesses should begin asking better questions of legal providers. A business does not need to demand that every law firm use AI, nor should it reject AI categorically. Instead, it should ask whether the firm has an AI policy, whether lawyers receive training, whether confidential client information is protected, whether outputs are verified, whether vendors are reviewed, whether AI use affects billing, and whether the client can approve or restrict certain uses. These questions are consistent with the report’s larger message that lawyers must balance innovation with professional responsibility. ¹
The report also suggests that clients should be realistic about what AI can improve. AI may reduce time spent on first drafts, document sorting, summarization, research assistance, and routine administrative work. It may help lawyers identify issues faster or organize large records more efficiently. But AI does not eliminate the need for strategy, judgment, negotiation, credibility, courtroom advocacy, or understanding of a client’s business objectives. In fact, as AI handles more routine work, the lawyer’s human judgment may become more important. Business clients should expect their lawyers to use time saved by technology to focus more deeply on risk, strategy, and practical outcomes.
Another important lesson is that AI use should be documented where appropriate. If a company relies on AI in a material process, it should be able to explain what tool was used, what data was used, who reviewed the output, and how the final decision was made. This is particularly important in litigation, employment, regulatory compliance, and customer-facing decisions. Documentation can show that AI was used as an aid rather than as an unchecked decision-maker. It can also help counsel defend the reasonableness of the company’s process if challenged.
The State Bar’s report should not be read as a warning to avoid AI altogether. Avoidance may itself become impractical as courts, clients, competitors, vendors, and law firms adopt AI-enabled systems. The better reading is that AI must be integrated deliberately. Lawyers should understand the tools they use, clients should understand the risks of their own tools, and both should agree on reasonable guardrails. The report’s recommendations for ongoing education, updated information, public guidance, and continued monitoring reflect the fact that AI will keep changing. ¹ Business clients should adopt the same mindset. An AI policy written once and forgotten will quickly become outdated.
For Michigan business clients, the report is also a reminder that legal ethics are not merely internal rules for lawyers. They affect the quality, cost, security, and reliability of legal services that businesses receive. When a lawyer protects confidentiality, verifies AI output, supervises staff and vendors, communicates material risks, and charges reasonable fees, the client benefits directly. When those duties are ignored, the client may suffer financial, legal, and reputational harm. The professional obligations discussed in the report therefore translate into practical client protections.
The most effective business response is to treat AI as part of enterprise risk management. Companies should identify where AI is already being used, classify uses by risk, review vendor terms, update confidentiality and data policies, train employees, coordinate with counsel, and revisit litigation-hold procedures. They should also decide when legal review is required before AI is used in contracts, employment, compliance, customer communications, or regulated decisions. These steps do not require panic or overregulation. They require the same disciplined approach businesses already use for cybersecurity, privacy, financial controls, and document retention.
The State Bar of Michigan’s AI report ultimately means that business clients should expect more from their lawyers and from themselves. They should expect lawyers to understand AI well enough to use it responsibly or to advise against its use when the risks outweigh the benefits. They should expect clearer conversations about confidentiality, billing, supervision, and verification. They should expect courts and regulators to become more attentive to AI-related issues. And they should expect that AI governance will become an ordinary part of commercial legal planning.
AI will not replace the need for legal judgment, but it will change the way legal judgment is delivered. The businesses that gain the most from AI will not be the ones that adopt every new tool first. They will be the ones that combine innovation with discipline, efficiency with verification, and automation with accountability. The State Bar of Michigan’s report points the legal profession in that direction. For business clients, the message is equally clear: AI can be a valuable legal and operational tool, but only when it is used with the care that law, ethics, and sound business judgment require.
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Footnoted Sources
1- State Bar of Michigan, “Transforming the Legal Landscape in the Age of AI: Report on Artificial Intelligence in the Legal Profession,” June 2025. https://www.michbar.org/AI
2- State Bar of Michigan, “Artificial Intelligence FAQs,” publication dates including November 18, 2024, and February 11, 2025. https://www.michbar.org/opinions/ethics/AIFAQs
3- Michigan Supreme Court, “Michigan Rules of Professional Conduct,” updated with Michigan Supreme Court orders effective January 1, 2026. https://www.courts.michigan.gov/492c94/siteassets/rules-instructions-administrative-orders/rules-of-professional-conduct/michigan-rules-of-professional-conduct.pdf
4- American Bar Association Standing Committee on Ethics and Professional Responsibility, Formal Opinion 512, “Generative Artificial Intelligence Tools,” July 29, 2024. https://www.americanbar.org/advocacy/governmental_legislative_work/publications/washingtonletter/january-25-wl/aba-ethics-generative-ai-0125wl/
5- Michigan Judicial Council, “Generative AI and the Courts Workgroup Report,” 2024. https://www.courts.michigan.gov/administration/special-initiatives/mjc/