Attorney errors and omissions policies universally contain a prior knowledge clause which precludes coverage for claims made during the policy period if, before the inception of the policy, the attorney had knowledge of the “actual alleged negligent act, error, or omission” that gave rise to the claim. Recently, the U.S. District Court for the Central District of California held that knowledge of the act itself was not enough to establish application of the prior knowledge exclusion. In Associated Industries Insurance Co. v. McNichols & McNichols, LLP, _____ F.Supp.3d _____, 2020 WL 7048302 (C.D. Cal. 10/19/20), the district court held that an attorney E&O insurance policy’s prior knowledge exclusion would apply only if it was established the attorney subjectively understood the negligent nature of the act that was committed. Thus, the attorney’s subjective knowledge of the act, by itself, was not enough to trigger the prior knowledge provision, even though an objectively reasonable attorney would have understood the wrongful nature of the act.
