(Article from Insurance Law Alert, November 2025)
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Holding
A New York district court did not err in ruling that oil cargo losses were caused by an “insurrection” under applicable policies and in providing jury instructions that included a but-for causation standard. CITGO Petroleum Corp. v. Ascot Underwriting Ltd., 2025 U.S. App. LEXIS 28170 (2d Cir. Oct. 28, 2025).
Background
The coverage dispute arose after a cargo of crude oil purchased by CITGO was seized by Venezuelan authorities. Over the course of nine months during 2018 and 2019, the cargo vessel remained at a Venezuelan port, unable to obtain clearance for departure. Eventually, an armed Venezuelan military vessel boarded the cargo ship and ordered return of the cargo. The cargo was ultimately removed and returned to Venezuela’s state-owned oil company.
According to the district court’s opinion in this case, those events were set in motion by a series of political events in Venezuela relating to the rightful head of government. In 2019, President Trump issued a statement recognizing Juan Guaido as the interim president of Venezuela and former Secretary Pompeo declared that Nicolas Maduro, who had served as interim president following Hugo Chavez’s death, did not have “legal authority” as president of Venezuela. These announcements came after several years of political unrest and incidents of violence between opposing groups supporting either Maduro or Guaido as the legitimate leader of Venezuela.
As these events unfolded, CITGO provided a notice of circumstances and a notice of potential claim to its reinsurers and requested reimbursement of the amounts incurred by CITGO in attempting to prevent the loss of cargo. The reinsurers denied coverage and CITGO sued, alleging breach of contract and alleging damages exceeding $40 million.
The parties cross-moved for summary judgment and the district court ruled in CITGO’s favor. The district court concluded that an “insurrection” had occurred for the purposes of coverage under the policy’s Institute War Clause, which covered risks “arising from” insurrection, among other things. In particular, the court held that the political conditions leading up to the seizure constituted an insurrection. In reaching that conclusion, the district court took judicial notice of the statements by President Trump and Secretary Pompeo as reflecting the official United States’ position on the legitimate government of Venezuela.
The case ultimately proceeded to trial on causation and damages. The district court provided a jury instruction relating to interpretation of the phrase “arising from” an insurrection, stating that “arising from” means that there is “at least some causal relationship between the injury and the risk for which coverage is provided” and that “arising from” has “broader significance than the words ‘caused by.’”
The jury issued a verdict in favor of CITGO on all issues but one, and the court issued judgment in the amount of approximately $54 million plus interest. The reinsurers appealed, arguing that the district court erred in granting CITGO’s summary judgment motion and in instructing the jury on but-for causation.
Decision
The Second Circuit affirmed the district court’s ruling that the term “insurrection” was ambiguous and that the actions leading up to the oil cargo loss constituted an insurrection under the policy. As to ambiguity, the court noted that the term was undefined and subject to different reasonable interpretations.
The court then employed the definition endorsed in Pan American World Airways, Inc. v. Aetna Casualty & Surety Co., 505 F.2d 989 (2d Cir. 1974), which held that an insurrection is “(1) a violent uprising by a group or movement (2) acting for the specific purpose of overthrowing the constituted government and seizing its powers.” The court concluded that these elements were met because it was undisputed that Maduro had used violence to retain control of the country after his term had ended and that the United States had recognized Guaido as the legal government of Venezuela.
The court rejected the reinsurers’ assertion that the “uprising” element was not satisfied because Guaido had never actually taken de facto control of Venezuela, noting that de facto control was not a necessary element of “uprising” and that Maduro’s violent actions to unlawfully retain power constituted an “uprising” for the purpose of overthrowing an existing government. Additionally, the Second Circuit held that the district court did not err in taking judicial notice of statements by U.S. officials in finding that the Guaido regime was the legitimate existing government during the relevant time frame.
Finally, the Second Circuit ruled that the but-for causation instruction given to the jury (rather than the proximate causation advocated by the reinsurers) was not erroneous. The court held that the reinsurers waived the causation argument by withdrawing their objections on the record at trial, and that in any event, the policy required but-for causation. The court reasoned that the appropriate causation standard is not determined by the type of dispute (here, maritime law, which typically involves a proximate causation standard) but rather by contract language. “Arising out of” language has been interpreted as requiring a but-for causation standard under New York law.
Comments
While the court deemed the term “insurrection” ambiguous, the decision does not alter the well-established principle that policy terms are not ambiguous simply because they are undefined or subject to competing interpretations by the parties to the dispute. Rather, the differing interpretations must be “susceptible to more than one meaning when viewed objectively by a reasonably intelligent person” and not resolved by reference to dictionary meanings.
Additionally, the court applied the doctrine of contra proferentem to resolve the ambiguity in favor of coverage. However, this doctrine is employed under New York law only as a last resort when extrinsic evidence does not resolve the meaning of the disputed term. Further, some courts have declined to apply contra proferentem when the insurance dispute involves a sophisticated business entity insured.
Finally, while original insureds typically lack contractual privity to bring direct actions against reinsurers, in this case the parties did not dispute that because of involvement of other non-party insurance companies in the insurance relationship, CITGO could pursue insurance claims directly against the reinsurers.