I guess you have never sued the government, even a local one? Allow me to illustrate how this works:
Kids-for-Cash scandal: 2,500+ children were affected by thousands of juvenile cases in a corruption scandal centered involving two judges, private detention company (hired as part of youth services, and the juvenile justice system), thousands of police officers and at least half of school officials, and tons of social workers involved in the scandal imprisoned kids for a cumulative 417 years (that's the absolute minimum, they won't say how much it really is, probably a factor of that).
"resolution": ZERO restitution to the victims, the budget of the department responsible was raised by 10s of millions. Ciavarella was sentenced to 28 years (mostly for dodging the taxes on his bribes), of which he spend 17 in prison, while Conahan, who paid taxes on his bribes, spent less than 9 years in prison before home confinement, and had the remainder of his sentence commuted by Presidential clemency. He is living off his pension in Florida, and receives police protection (there's been several attempted murders of him by his victims. There is a slight issue with his police protection: apparently his police guard LET kids beat him up more than a few times too. He filed a case against the officers, which was dropped). To add insult to injury, extra budget was approved to you youth services "to help". Needless to say, they used part of the budget they got to imprison more kids for refusing to cooperate (and worse, they complain about the total unfairness that one of the employees was killed by one of those kids and the very light sentence that kid got for some reason). A LOT of people got attacked by kids in Pennsylvania for over a decade.
What they DID was imprison 2500 children for a minimum of 2 months each, bribed by money paid from youth services budget by a private detention facility. NONE of the other people involved faced any consequences. Not the private detention facility (children are locked up there at this very moment), not the youth services department. Not the people who organized the cases, not the mostly school officials doing the referrals, not the politicians approving the cases and budget that was used for bribing judges. In total about 1200 state officials were involved.
For comparison: Michael Webb kidnapping (Texas, 2019). A private individual confined an 8-year-old girl for about 8 hours before police rescued her. He was sentenced to life in federal prison.
In the kids for cash scandal 1200 state officials conspired to imprison kids for a cumulative total of 417 years, and a normal person gets life in prison for 8 hours of confinement. This would mean that a fair court system would have had enough cause to put EVERY state employee, and the governor who was responsible of course, in prison for at least 5 consecutive life sentences.
You see how holding the state responsible works? If it's bad enough they'll throw someone to the wolves, as well as everybody who refused to pay taxes. Totally ignoring that half the state's employees were involved, as a lot of politicians were pushing for this to happen (e.g. the governor was obviously strongly involved here). But if you compare the punishments for private citizens violating the law to what is given out if government is responsible for the exact same crime you get completely absurd comparisons. The punishments doled out to officials for the crime of kidnapping children were 46 THOUSAND TIMES less than to a criminal. That's 4,600,000% less.
Oh and to make the comparison even more ridiculous, the restitution the offenders owed to the victims, when they were state employees was MINUS 36 THOUSAND times what the court gave to a private individual's victims. And the result of this "justice" the state's budget was INCREASED due to the crime, with the net result of "justice" being more kids getting locked up. Again: government victims got ZERO (unless you count getting imprisoned again)
It's not just that courts are absurdly more lenient against their employer, they are also generous with other people's money and literally reward the offenders if they're the courts' employers.
(and let's not pretend Europe is any better. Every European government also managed to lead poison large amounts of kids, and failed to take responsibility)
So you see, there is no need to worry about the financial fallout when the AI fails catastrophically for insurance. No need at all.