I'm designing an app for a wearable device which is connected to the phone over bluetooth. The app more or less can't do anything without a device being connected. When launching the app, the first screen is "connect your device" which describes how to do that. There is no way past that screen unless the device is connected (since we don't want the user to assume they can use the app without the device).
Now the question: what to do if while using the app, the device is suddenly disconnected? When that happens, the user would typically be on a screen that shows device-related controls, which now don't work any more.
Some of the options:
show a modal dialog,
go back to the "connect your device" screen, or
stay on the current screen but gray out all the controls (and overlay some text that says "not connected").
If a modal dialog, I suppose there would not be any way to close it (it would close itself when the device is connected again).
Note: the app always tried to reconnect with the device automatically; the user doesn't need to do anything on the app side to make that happen, although they might have to (for example) recharge the battery on the device or make sure it is within range. There are some easy troubleshooting steps described on the "connect your device" screen, and also what steps to connect the first time.