These clauses are sometimes found in policies in the UK but are more commonly found in other jurisdictions, for example, Singapore. The effect of such clauses is to extend cover to claims under a current policy which should have been notified under an earlier one.
In this case, an insured entered into an agreement in 2008 which arguably led to it entering into a further agreement in 2010. It was alleged that the insured had committed certain errors and omissions. A claim was notified to insurers under a 2013/14 policy.
The defendants had entered into consecutive annual contracts of insurance on similar terms for periods prior and subsequent to the relevant cover, starting on 9 June 2009.
The policy had a retroactive date clause excluding coverage of a Claim that was "in any way involving any act, error or omission" committed before 5 June 2009; a notification clause, as a condition precedent for coverage; and a continuous cover clause extending cover to claims that should have been notified under the prior year's policy. The judge held that the retroactive date clause did not apply in the circumstances. The judge also held that a letter from the third party was not a "Claim" for the purposes of the cover but, even if it was, it was clear that the terms of the notification clause did "not take effect to nullify the effect of the Continuity of Cover Clause." Therefore, insurers would not be afforded this defence. The whole point of the clause was to extend cover to claims where there had been a breach of the notification condition precedent in the prior year; any breach of the condition precedent would preclude the insured from recovering under the prior year (and, if insurers did not renew, there would be no cover later on either). Where insurers did renew on terms which included the clause, there would be cover for claims which should have been notified under the prior year.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.