Is any applicant aware of any fact, error, omission, circumstance, or situation that may provide grounds for any claim under the proposed insurance?

This question helps the insurance carrier identify potential risks or undisclosed issues that could lead to claims under the proposed policy. Awareness of such circumstances can affect coverage terms, exclusions, or even policy issuance, as failing to disclose may result in coverage disputes or policy rescission. This is often referred to as the "warranty question."

• What is a "Potential Claim" or "Circumstance"? This is any situation that a reasonable professional would believe could lead to a future claim, even if no one has made a demand or expressed dissatisfaction yet. Examples include a missed deadline on a critical project or a known error in a deliverable.
• What is an "Error"? An error is a mistake, inaccuracy, or misjudgment made while providing professional services.
• What is an "Omission"? An omission is a failure to perform a necessary act or duty as part of your professional services. It's about what you didn't do but should have.
• What is a "Warranty Statement"? This is a mandatory statement in the application where you affirm that, as of the date of signing, you are not aware of any potential claims other than those you have disclosed. A breach of this warranty can void coverage.

To answer this question, you must think broadly about any issues that could possibly lead to a future claim. Consider the following:

• Facts: Is there any specific information or incident (e.g., a data breach, a major project failure) that could be the basis for a claim?
• Errors: Are you aware of any mistakes made in your professional services that might cause a problem for a client?
• Omissions: Can you think of anything you or your team failed to do that could lead to a negative outcome for a client?
• Situations: Are there any brewing disputes, seriously dissatisfied clients, or other circumstances that might escalate into a formal claim?

If you are aware of anything that fits these descriptions, you must disclose it. If you have nothing to report, you can answer "No."

• Mistake: Believing that if a client hasn't complained, there's nothing to report.
  • You must disclose any situation you are aware of that could reasonably lead to a claim, regardless of whether the client has expressed dissatisfaction. The duty is to report the potential.
• Pitfall: Assuming an issue is too small to mention.
  • It is the insurer's right to assess the risk, not the applicant's. When in doubt, you should disclose the matter to your agent to determine if it needs to be included.
• Mistake: Thinking this only applies to your own knowledge.
  • You must make a reasonable inquiry within your firm. The question covers the awareness of any applicant, which includes all key partners and principals proposed for coverage.
• Pitfall: Fearing that disclosure will automatically lead to denial.
  • While disclosure can impact the application, non-disclosure is far worse and can lead to a claim being denied or the entire policy being voided for misrepresentation. Full transparency is critical.