THE TERM “continuity” is frequently used when discussing directors and officers liability insurance, employment practices liability insurance and other claims-made products. Yet, the concept is often confusing to many insurance professionals. The dictionary defines continuity as “uninterrupted succession or flow.” That accurately describes the purpose of continuity in insurance policies. The objective is to see that the original coverage is maintained, without gaps, as insurance is renewed from year to year.
Three matters must be addressed when trying to ensure continuity. One, pertaining mainly to D&O policies, is the warranty of the initial application. Another is the policy's pending or prior litigation exclusion date, and the third is the prior-acts exclusion and retroactive date.
The chain of continuity begins when coverage is first written for an insured. If coverage renews with the incumbent insurer, continuity is maintained at the anniversary of the first renewal and thereafter, as long as coverage is maintained with the same insurer. However, if the insured opts to renew with another insurer, continuity may or may not be maintained, depending on the new insurer writing the coverage.
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