The Institutional Window: Occupation- and Jurisdiction-Specific Calibration of Liability Signaling for Preserved Human Fallback Capability

Andreas Bauer

Papers from arXiv.org

Abstract: Generative AI makes expert output uninformative about the human fallback capability its provider keeps in reserve. A liability commitment can signal that capability: a provider whose staff rescue more of the cases the AI fails pays damages less often, so the commitment certifies an asset built by keeping people on cases and lost by taking them off. This paper asks where contract law leaves room for such a signal. Four legal primitives map a posted cap into retained exposure and close the message space from both sides: litigation viability, the penalty doctrine, displacement of liability to the state or an indemnity pool, and mandatory control of standard terms. Where the law leaves an option of zero exposure, low types pool at zero, intermediate types separate on a schedule anchored at the mandatory floor, and high types pool at the ceiling; where it does not, separation starts at the bottom type. A statutory floor removes the lower pool but pushes the schedule toward the ceiling, so its net effect is not monotone. The penalty doctrine decides whether recovery adequate for deterrence can be restored by contract or only by investing in verifiability. Holding fallback skill constant demands more human engagement the less often the AI fails. A calibration to five occupations and twelve legal configurations in Germany, Austria, Switzerland, the United Kingdom and the United States locates the binding margin of each cell and supports no ranking by legal family or contracting channel.

Date: 2026-08, Revised 2026-09
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