Professional liability applications are representations (and sometimes warranties) to insurers, and insurance agents and brokers should make sure their clients take these representations seriously. A court recently voided an attorneys E&O policy from inception because the attorney represented that he did not have knowledge of a situation that could result in a claim, and he clearly did (see here & here).
The attorney applied for attorney’s professional liability insurance, and represented that there he was not aware of any situations which could result in a claim. At the time he was participating in an illegal scheme to divert funds. The court ruled that the insurer could terminate its defense, rescind the policy from inception and seek reimbursement of legal fees.