Artificial Intelligence (AI) is now deeply embedded in decision-making processes across diverse fields such as healthcare, banking, transportation, and even judicial systems. While this integration has improved efficiency, it has also generated unprecedented legal challenges regarding liability when AI-driven decisions cause harm. Traditional liability frameworks, which rest on human fault or intent, are ill-suited to address autonomous and opaque AI systems. This paper examines the inadequacies of existing doctrines, surveys international approaches, and evaluates new proposals such as the European Union’s AI Liability Directive. It further explores theoretical models, debates on digital personhood, and the role of corporate governance. The study concludes that an effective legal regime for AI must balance innovation with accountability through strict liability mechanisms, risk-based regulations, and enhanced oversight, ensuring both victim protection and technological advancement.