We _ Harold for three years before he died.
a) knew. b) have known.
Which answer should I use in my exam question? I have doubts, as I want to choose a, but a friend of mine advises me to choose b.
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As Dr. Lawler pointed out in comments, had known (past perfect) is the correct tense for a continuous activity that started and ended in the past. The simple past (knew) is fine as well, but it is used more often for a discrete event.
See this representation from a previous Question (How do the tenses and aspects in English correspond temporally to one another?):
Have known carries into the present.
Since he is no longer among us (alive) I would rather choosing "past simple" than "present perfect" because there is no more connection between the past and the present.