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The continuity date, sometimes referred to as the "prior knowledge" date refers to the date when designated parties first become aware of an incident which may be a covered act under an insurance policy. Continuity dates are exclusively found in claims made based insurance policies, never occurrence form insurance policies.
Any act which any designated party is made aware of before the continuity date listed on the policy would not be covered by the policy in question. While this seems like it may present a major hole in coverage, it does not have to with good risk management practices. Assuming the line of coverage for which the continuity date applies exists when a designated person becomes aware of a possible covered act, as long as the act is reported immediately to the present insurance carrier, the claim will be covered no matter the date that the actual demand is presented to the insured. However, if the line of insurance is not in effect at the time the designated parties become aware of a possible covered act, no insurance will apply. This precludes adverse selection of risk by insurance companies. An entity could not become aware of an employment practices wrongful act and then purchase employment practices for the first time and expect the situation of which they were already aware to be covered under the policy.
Do not confuse designated person with insured person, there is a meaningful difference. Often, insurance policies state that only the knowledge by an executive officer, director, human resources department, or legal department constitutes knowledge by the insured organization. Knowledge by rank and file employees would not constitute prior knowledge for the continuity date.
Do not confuse the continuity date with the prior and pending litigation date. The prior and pending litigation date precludes claims regarding allegations made in litigation or administrative actions preceding the prior and pending date listed in the policy. The difference is for the continuity date exclusion to be triggered, formal litigation or administrative action does not have to have been filed while it would under the prior and pending date exclusion.
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(1) It especially occurs on the claims made policy (such as D&O, EPL, Fiduciary, etc.), when the insured change the carrier, the insured needs to know that there will be no gap in coverage form wrongful acts that occur prior to the inception date of the policy that do not result in a claim until after the new policy has incepted.
(2) The initiation date of the first policy would be referred to as the continuity date.
(3) Some insurers in the past put wrongful dates on new policies that precluded coverage for acts that occurred prior to the inception date. So now when an insured is considering switching insurers, the broker needs to address continuity to ensure that there will be no gap in coverage. In the current market, most insurers will agree to provide continuity.
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