This article from columnists Norman Arnoff and Sue Jacobs [subscription] warns us to protect legal malpractice coverage by carefully answering the application questions.
"Every year someone in each law firm has the task of completing the application for the Lawyers’ Professional Liability Policy commonly called the Malpractice Policy. The policy is "claims-made" so that claims first made during the policy period will be covered during the policy in issue. If the policy is "claims-made and reported" the claim must also be reported during the policy period for coverage.
If the applicant does not disclose or misrepresents a fact that ripens into a claim or lawsuit during the policy term, the carrier may claim the law firm made a false representation of a material fact to induce the carrier to issue the precise policy. The carrier may also attempt to rescind the policy if the claim is significant.
The lawyer may believe she did not purposely answer the question falsely, but, rather, was unaware of all the underlying information. If there is an innocent reason for the nondisclosure the insurer will not be able to rescind. Rather, the carrier will have to establish the misrepresentation to be material and fraudulent, and that it would not have issued the policy for the premium charged if it had the true facts.