INSURANCE GUIDE
Known Circumstances and Prior Knowledge in E&O Insurance
Claims-made E&O policies commonly address facts or circumstances known before the policy begins. Understanding those provisions is important when applying, renewing or changing carriers.
Quick answer
A known circumstance is a fact, event, complaint or situation that could reasonably be expected to lead to a claim. Prior-knowledge language can restrict coverage when an insured knew, before the policy began, of circumstances that might result in a claim.
Why this matters in claims-made coverage
Claims-made E&O is highly sensitive to timing. A new policy is generally not intended to insure a problem the applicant already knows may become a claim. Applications therefore commonly ask about known claims, incidents or circumstances.
Review Claims-Made vs. Occurrence Insurance →
Examples of circumstances worth escalating
Examples can include a written client complaint, demand for reimbursement, threat of legal action, regulatory inquiry, allegation of a missed disclosure, transaction dispute, escrow shortage, or another situation that management reasonably believes could develop into a claim.
Report rather than assume
Do not assume an issue is too minor to matter. The policy may allow or require notice of circumstances that could later become claims. Reporting requirements differ, so the actual policy and carrier instructions control.
Changing carriers creates extra risk
If a circumstance is known before a new policy starts, the new carrier may exclude it even when the policy otherwise provides prior-acts coverage. That is why continuity, retroactive dates, prior acts and known-circumstance reporting should be reviewed together before replacing coverage.
Read about Prior Acts Coverage →
Review what to check before changing E&O carriers →
Practical questions to review
- What does the application ask about known claims or circumstances?
- What does the policy require you to report?
- Can circumstances be reported before they become formal claims?
- Who inside the brokerage is responsible for escalating complaints?
- What documentation should be preserved?
When in doubt, involve the broker and carrier promptly rather than waiting for the situation to escalate.
In this guide
Known circumstances
Prior knowledge
Carrier changes
Questions about this coverage?
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