The known loss rule is an insurance principle that prevents someone from purchasing insurance coverage after they already know that a loss or claim has occurred or is certain to happen. Essentially, this rule says that you cannot buy insurance to cover something that has already happened or that you know will definitely happen in the near future. For example, you cannot purchase auto insurance after you've already been in a car accident and then try to file a claim for that accident, or buy health insurance after you've already been diagnosed with a serious medical condition and expect it to cover pre-existing treatment costs.
In personal injury cases, the known loss rule can sometimes become relevant when dealing with insurance coverage issues or when determining what damages can be recovered. For instance, if someone tries to increase their insurance coverage after an accident but before filing a claim, the insurance company might invoke the known loss rule to deny coverage for that incident. This rule protects insurance companies from people who try to game the system by only purchasing coverage when they know they'll need to use it, which would make insurance financially unsustainable since the whole system depends on spreading risk among many people who pay premiums but may never need to file claims.
