Policy mechanics
Prior and known circumstances: what happens to issues you already knew about
Why a new PI policy won't cover a circumstance you were already aware of before it started, and how this affects switching insurers.
Key takeaways
- ✓PI insurance responds to claims and circumstances that were not known to you before the policy began
- ✓A "known circumstance" — something you were aware of and reasonably should have expected could lead to a claim — is typically excluded from a new policy, even if you never formally notified anyone
- ✓This is why accurate disclosure at renewal or when switching insurers matters — an undisclosed known circumstance can void cover for that specific matter
- ✓The right response when you become aware of a possible issue is to notify your current insurer promptly, not wait and hope it doesn't surface before your next renewal
Why this exclusion exists
Insurance is designed to cover unknown, uncertain future risk — not issues you already know exist. Without this exclusion, cover could effectively be purchased retroactively to insure a problem you were already aware of, which would undermine the basic economics of insurance for everyone.
How this interacts with notification
This is the flip side of notifying circumstances promptly. Notifying your current insurer as soon as you become aware of a possible issue means it's dealt with under the policy in force at that time — rather than becoming an uninsurable "known circumstance" for any future policy you take out. See our notification of circumstances guide for how and when to do this.
Switching insurers with an open circumstance
A new insurer will typically ask you to disclose any known circumstances as part of the application. Failing to disclose can void the new policy for that specific matter, even if it was never formally lodged as a claim.
If properly disclosed, the new insurer may specifically exclude that matter from the new policy, while your outgoing insurer — if it was notified in time — generally remains responsible for it under your old policy.
FAQ
Frequently asked questions
The test is usually what a reasonable professional in your position ought to have expected, not absolute certainty. If you're in doubt, the safer course is always to disclose and notify.