For many law firms, a data breach still feels like something that happens to someone else.
But over the past year, that assumption no longer holds up.
Cyber incidents targeting legal organizations are rising, the costs associated with those breaches are climbing, and the ways firms are inadvertently exposing sensitive data including through unmanaged AI use are more complex than ever.
Data Breaches Are No Longer Rare or Affordable
According to IBM’s Cost of a Data Breach Report 2025, the average cost of a U.S. data breach jumped to over $10.22 million, the highest on record for any region studied, even as the global average was lower overall.
That’s a staggering figure and it doesn’t just account for incident investigation and remediation. It reflects downtime, legal exposure, regulatory fines, and reputational fallout that can ripple across years.
For the legal sector specifically, independent industry data shows that the average cost of a law firm-specific data breach is roughly $5.08 million, marking about a 10% increase from previous years.
Meanwhile, cloud backup organizations and cybersecurity analysts alike note that law firm breaches are increasing in number and visibility, as attackers exploit gaps in traditional defenses.
Most Breaches Begin with Everyday Behavior
Contrary to popular belief, most breaches don’t begin with sophisticated zero-day exploits. They start with simple human behaviors:
- Phishing emails that convince employees to click on malicious links
- Reused or weak passwords
- Unpatched systems
- Administrative misconfigurations
In the Cost of a Data Breach Report, IBM found that malicious insiders and phishing were among the most costly attack vectors, often resulting in higher overall breach costs.
This pattern is why cybersecurity fundamentals like training, access controls, monitoring, remain essential.
AI Is Increasing the Attack Surface
AI tools are now deeply embedded in everyday workflows — including in law firms where staff use them to summarize documents, draft language, and brainstorm ideas.
But the IBM Cost of a Data Breach Report 2025 also highlights a new source of risk: “shadow AI”, AI tools in use without governance or oversight. Organizations experiencing breaches linked to shadow AI reported that it made breaches significantly more costly and exposed more data.
The same report notes that 97% of breaches involving AI tools occurred in organizations without proper AI access controls or governance policies in place.
This isn’t just theoretical, attackers are already leveraging AI to craft more convincing phishing campaigns, automate attacks, and bypass legacy security tools.
This Is a Governance Gap, Not Just a Tech Problem
Too often, breaches are treated as “IT failures.” But the data shows they’re governance failures that are caused by people, process, and policy gaps rather than purely technical glitches.
IBM’s findings make it clear that rapid adoption of AI tools without adequate oversight is outpacing security preparedness, creating opportunities for bad actors to exploit.
That means AI governance, not tool choice, is what separates controlled, low-risk use from exposure and breach.
The Financial and Reputational Impact Goes Beyond the Incident
Recovering from a breach isn’t just about covering invoices. Firms face:
- Billable hours lost while systems are down
- Increased premiums on cyber insurance
- Regulatory scrutiny and potential fines
- Client trust erosion and lost business
Client confidence is especially critical in legal services. A study reported that a significant portion of clients would consider switching firms after a breach because of security and AI handling concerns.
In other words, a breach can cost much more than the incident itself, it can cost your reputation.
Cyber Insurance Is Evolving, And So Must Your Risk Management
Cyber insurers are no longer simply underwriting based on firewalls and antivirus. They now ask about AI usage policies, governance frameworks, and data handling practices during the underwriting process.
Many insurers are adding clauses around shadow AI and AI governance precisely because ungoverned AI use has been linked to more costly breach incidents.
Firms that can show strong AI oversight like documented policies, controlled use cases, logging, and review, are better positioned for favorable terms.
Readiness (Not Reactivity) Is How Firms Stay in Control
The firms best positioned to avoid costly incidents are not the ones banning AI or disabling tools.
They’re the ones that plan for AI use from the start.
An AI Readiness Assessment helps firms:
- Discover where AI is already in use
- Understand how it interacts with sensitive data
- Identify governance, training, and control gaps
- Align AI use with compliance and insurance requirements
This builds confidence internally and externally, before something goes wrong.
Final Thoughts
The cost of a law firm data breach isn’t just measured in dollars. It’s measured in billable hours lost, regulatory headaches, and the erosion of client trust. AI isn’t just another technology to bolt on. It’s a strategic capability that demands structured governance if it’s going to help your practice.
The question isn’t whether cybersecurity matters. It’s whether your AI use is governed with the same diligence as every other system that touches client data. Firms that answer that with confidence will be far better positioned than those who wait for a breach to expose the gaps.
Want to get started? Reach out to learn more today.
