Air Canada ordered to honor refund its chatbot invented

What happened

In November 2022, Jake Moffatt's grandmother died. He visited Air Canada's website to book a flight to the funeral and asked the customer support chatbot about bereavement fares. The chatbot told him he could apply for a bereavement refund within 90 days of travel. Moffatt booked the flight, traveled, applied for the refund, and was denied. Air Canada's actual bereavement policy required the application before travel, not after.

Moffatt sued at the Civil Resolution Tribunal of British Columbia. Air Canada argued that its chatbot was a separate legal entity responsible for its own actions. The tribunal disagreed. In February 2024, member Christopher Rivers ordered Air Canada to pay Moffatt C$650.88 in damages, C$36.14 in interest, and C$125 in tribunal fees, holding that "while a chatbot has an interactive component, it is still just a part of Air Canada's website."

The decision is now the most cited precedent for enterprise chatbot liability. Air Canada removed the chatbot after the ruling.

What broke inside the model

The chatbot produced confident output about a policy that did not exist in any retrievable source. The most likely mechanism is hallucination, where the model generated plausible-sounding policy language without grounding it in the airline's actual fare rules. A secondary possibility is retrieval failure, where the retrieval layer surfaced an unrelated bereavement policy from a partner airline or a third-party site.

Either way, the model committed the airline to a policy through a customer-facing surface. There was no policy-enforcement layer that compared the model's response to the source of truth before sending it.