The Insurance Company of the State of Pennsylvania v. Equitas Insurance, 68 F.4th 774

ICSOP issued a $20 million umbrella liability policy to Dole covering Oct. 1, 1968–Oct. 1, 1971; Equitas (successor to Lloyd’s) reinsured part of that risk under a facultative reinsurance treaty covering the same period.
Decades later, California homeowners sued Dole for long-tail benzene contamination; Dole and insurers settled and allocated $20 million to the ICSOP policy under California’s “all sums” allocation rule for continuous exposures.
ICSOP sought payment from Equitas under the reinsurance; Equitas refused, arguing (1) English law (governing the reinsurance) would prorate liability rather than apply an all sums rule, so its exposure is limited, and (2) ICSOP’s delayed notice justified full repudiation of the reinsurance.
District court granted summary judgment to ICSOP, holding the reinsurance is co‑extensive (back‑to‑back) with the underlying policy and rejecting Equitas’s late‑notice repudiation defense; ICSOP awarded $7,234,125.
On appeal, the Second Circuit applied English law to predict how the UK Supreme Court would decide and affirmed the district court.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether facultative reinsurance is co‑extensive with the underlying insurance (back‑to‑back), despite foreign/all‑sums allocation of the insured’s liability	ICSOP: English law presumes proportional facultative reinsurance is back‑to‑back; reinsurer must follow settlements and cover what insurer is liable for	Equitas: English law prioritizes policy period; Wasa limits back‑to‑back where governing law of underlying was unpredictable; thus reinsurance should be confined to the three‑year period (pro rata)	Court: Presumption of back‑to‑back coverage is strong; presence of an identifiable choice‑of‑law for the underlying policy and commercial purpose support co‑extensive coverage; affirmed co‑extensive liability
Whether insurer/reinsurer may fully repudiate for late notice when timely notice is not a condition precedent	ICSOP: English law rejects partial repudiation for late notice; full repudiation requires extreme facts showing dishonest non‑notification causing serious prejudice, which are absent	Equitas: ICSOP delayed informing reinsurer ~6 years and misled it, warranting full repudiation	Court: Timely notice not a condition precedent; no English authority supports full repudiation on these facts; alleged conduct did not show the extreme prejudice required; repudiation defense rejected

Wasa Int’l Ins. Co. v. Lexington Ins. Co., 1 AC 180 (House of Lords 2010) (limits application of back‑to‑back presumption where governing law of underlying policy could not be predicted at contracting)
Forsikringsaktieselskapet Vesta v. Butcher, 1 AC 852 (House of Lords 1989) (reinsurance follows the underlying insurance meaning absent express contrary terms — supports back‑to‑back construction)
Fairchild v. Glenhaven Funeral Servs. Ltd., 1 AC 32 (House of Lords 2003) (relaxed causation for mesothelioma: exposure may suffice to establish liability)
Barker v. Corus UK Ltd., 2 AC 572 (House of Lords 2006) (apportioned mesothelioma liability pro rata; later addressed by statute)
Municipal Mutual Ins. Ltd. v. Sea Ins. Co. Ltd., Lloyd’s Rep. (Civ) 421 (Court of Appeal 1998) (emphasizes importance of policy period; limited rejection of back‑to‑back presumption in certain contexts)