Insurrection Under War-Risk Policies Includes Acts by a De Facto Regime Against the U.S.-Recognized Government; “Arising From” Requires But-For Causation

Introduction

In CITGO Petroleum Corp. v. Ascot Underwriting Ltd., the Second Circuit affirmed a $54.2 million judgment (plus interest) for CITGO in a marine cargo war-risk coverage dispute arising from the seizure of a crude oil cargo in Venezuela. The case turns on two doctrinal pivots with broad commercial and public law significance:

• First, the court holds that an “insurrection” within the Institute War Clauses can be perpetrated by a sitting, de facto regime (here, Nicolás Maduro’s) against the “constituted government” as determined by U.S. Executive recognition (here, Juan Guaidó’s government). The recognition doctrine fixes who qualifies as the “constituted government,” and the policy’s coverage is interpreted accordingly.
• Second, the court clarifies that the phrase “arising from” in the Institute War Clauses invokes a but-for causation standard under New York law, not the narrower “proximate cause” test applied to exclusions using “due to or resulting from” language in Pan Am.

The reinsurers challenged the district court’s summary-judgment determination that an “insurrection” occurred, the court’s judicial-notice rulings, and the jury instruction on causation. The Second Circuit affirmed on each ground, marking a consequential precedent at the intersection of war-risk insurance, U.S. foreign relations recognition, and causation in insurance contracts governed by New York law.

Summary of the Opinion

The Second Circuit (Chin, J., joined by Pérez and Nathan, JJ.) affirmed the district court’s rulings and the final judgment for CITGO. The key holdings are:

• “Insurrection” is ambiguous in the parties’ war-risk coverage grant; absent extrinsic evidence, ambiguity in a coverage inclusion is construed in favor of the insured under contra proferentem.
• Applying the Second Circuit’s definition from Pan American World Airways, Inc. v. Aetna Casualty & Surety Co., the court held that the Maduro regime’s violent actions to retain power against the U.S.-recognized Guaidó government constitute an “insurrection” as a matter of law. De facto control by Maduro did not defeat the “insurrection” characterization because, under the recognition doctrine, the “constituted government” was Guaidó’s.
• The district court did not abuse its discretion in taking judicial notice of (a) U.S. Executive Branch recognition of Guaidó and (b) select historical facts from State Department, Congressional Research Service, and United Nations reports, to the extent they were not reasonably disputable.
• The reinsurers waived their causation-instruction objection by withdrawing it at trial. In any event, on the merits, the policy’s “arising from” language requires but-for causation under New York law.

Background and Facts

The case arose from the seizure of nearly one million barrels of crude oil loaded on the M/T Gerd Knutsen in Venezuelan waters in January 2019. CITGO had purchased the oil from PDVSA and secured a marine cargo reinsurance policy attaching from the time the cargo became at CITGO’s risk. In January 2019, the U.S. Executive Branch recognized Juan Guaidó as the interim president of Venezuela; sanctions were extended to PDVSA, impacting payment mechanics. A prolonged standoff ensued. In February 2020, Venezuelan military forces and PDVSA compelled the Gerd to Port Jose under threat and escort, where the cargo was discharged to PDVSA.

CITGO sought coverage under the policy’s Institute War Clauses, which covered loss “caused by” seizure “arising from” insurrection. The reinsurers denied coverage, disputing that an “insurrection” occurred and causation. On cross-motions for summary judgment, the district court held that an “insurrection” occurred as a matter of law. A jury later found causation and awarded damages; the reinsurers appealed.

Analysis

Precedents Cited and Their Role

• Pan Am. World Airways, Inc. v. Aetna Casualty & Surety Co., 505 F.2d 989 (2d Cir. 1974)
  • Defines “insurrection” for insurance purposes as a “violent uprising by a group or movement acting for the specific purpose of overthrowing the constituted government and seizing its powers.”
  • Applies proximate cause to exclusions phrased as “due to or resulting from,” while noting insurers can draft differently if they want more remote causes to count.
  • Here, Pan Am.’s definition supplies the substantive elements. But Pan Am.’s causation holding does not control, given the different text (“arising from”) and posture (coverage grant, not exclusion).
• Home Insurance Co. of New York v. Davila, 212 F.2d 731 (1st Cir. 1954)
  • Emphasizes that insurrectionary intent does not require a reasonable chance of success; a quixotic effort can be insurrection.
  • Supports the Second Circuit’s conclusion that the Maduro regime’s intent to remain/retain power against the constituted government aligns with insurrectionary purpose.
• Holiday Inns Inc. v. Aetna Ins. Co., 571 F. Supp. 1460 (S.D.N.Y. 1983), aff’d in relevant respects elsewhere and Younis Bros. & Co. v. CIGNA Worldwide Ins. Co., 91 F.3d 13 (3d Cir. 1996)
  • Both employ Pan Am.’s taxonomy of civil unrest and treat “insurrection” as the most basic form within war-risk concepts, reinforcing the breadth of the term.
• New York contract principles:
  • Morgan Stanley Group Inc. v. New England Ins. Co., 225 F.3d 270 (2d Cir. 2000); Alexander & Alexander Servs., Inc. v. These Certain Underwriters at Lloyd’s, London, 136 F.3d 82 (2d Cir. 1998); Hugo Boss Fashions, Inc. v. Federal Insurance Co., 252 F.3d 608 (2d Cir. 2001): The court determines ambiguity; extrinsic evidence may resolve it; absent such evidence, contra proferentem applies.
  • Handelsman v. Sea Ins. Co., 647 N.E.2d 1258 (N.Y. 1994); Pioneer Tower Owners Ass’n v. State Farm Fire & Cas. Co., 908 N.E.2d 875 (N.Y. 2009): Ambiguities in inclusions are construed broadly (in favor of coverage); exclusions narrowly.
• Causation under New York law:
  • Maroney v. New York Central Mutual Fire Ins. Co., 839 N.E.2d 886 (N.Y. 2005): The phrase “arising out of” invokes but-for causation (“some causal relationship”).
  • Burlington Insurance Co. v. NYC Transit Auth., 79 N.E.3d 477 (N.Y. 2017): Courts give effect to the legal concept expressed by policy language; “caused, in whole or in part” communicates proximate cause, whereas “arising out of” is broader and aligns with but-for causation.
• Recognition doctrine:
  • Zivotofsky v. Kerry, 576 U.S. 1 (2015): Executive’s recognition power is exclusive; the Nation must speak with one voice on recognition.
  • Guaranty Trust Co. v. United States, 304 U.S. 126 (1938); United States v. Belmont, 301 U.S. 324 (1937): Executive recognition is conclusive on domestic courts.
  • Cheung v. United States, 213 F.3d 82 (2d Cir. 2000); Can v. United States, 14 F.3d 160 (2d Cir. 1994): Courts lack authority to second-guess recognition; they may decide only the legal consequences.
  • KMW International v. Chase Manhattan Bank, N.A., 606 F.2d 10 (2d Cir. 1979); Williams v. Suffolk Insurance Co., 38 U.S. 415 (1839): Recognition doctrine applies even in private insurance and commercial disputes; courts are bound to apply recognition when interpreting contracts.
• Judicial notice:
  • Fed. R. Evid. 201; Staehr v. Hartford Financial Services Group, 547 F.3d 406 (2d Cir. 2008); International Star Class Yacht Racing Ass’n v. Tommy Hilfiger U.S.A., Inc., 146 F.3d 66 (2d Cir. 1998): Courts may judicially notice facts not subject to reasonable dispute from reliable sources and must allow parties to be heard.
  • Menominee Indian Tribe of Wisconsin v. Thompson, 161 F.3d 449 (7th Cir. 1998): Public reports can be proper subjects of judicial notice.
  • Bridgeway Corp. v. Citibank, 201 F.3d 134 (2d Cir. 2000): Background facts, even when noticed, must not be outcome-determinative to present prejudice concerns.

Legal Reasoning

1) “Insurrection” Is Ambiguous; Contra Proferentem Applies to a Coverage Grant

The policy did not define “insurrection.” The Second Circuit agreed with the district court that reasonable persons could differ on whether the events in Venezuela fit the term, notwithstanding dictionary definitions, and thus the term was ambiguous. Because neither party supplied extrinsic evidence of the parties’ intended meaning at formation, contra proferentem applies as a last resort—and because this is a coverage inclusion, ambiguity is construed broadly in favor of the insured.

2) Applying Pan Am.’s Definition to Unusual Facts: An Incumbent Regime Can Be the Insurrectionist

The court proceeded element-by-element under Pan Am.:

• Violence: The reinsurers did not dispute that violence occurred—raids, attacks, arrests, threats, and a militarized seizure of the cargo. The element was satisfied.
• Uprising to overthrow/seize powers: The court emphasized undisputed facts showing Maduro’s purpose to retain state power against the U.S.-recognized interim president, Guaidó—including creation of a Constituent Assembly against the existing National Assembly, violent suppression of opposition, and statements invoking armed struggle. Pan Am. and Davila indicate that success probability is irrelevant; insurrectionary intent can be quixotic.
• Against a “constituted government”: This is where the opinion breaks new ground. Under the recognition doctrine, U.S. Executive recognition of Guaidó (January 23, 2019) fixed the “constituted government” for U.S. courts. Thus, even though Maduro held de facto control, the actions were legally assessed as an uprising against the constituted government. The court held it would not revisit the legitimacy or timing under foreign law (Venezuelan constitutional law) because recognition is conclusive domestically. Rule 44.1 foreign-law questions were effectively mooted by recognition.

In addition, the court explained that earlier war-risk cases did not require that the targeted regime exercise de facto control; they simply involved different fact patterns (localized insurgencies). Here, the unique posture—an incumbent de facto regime versus a recognized government—did not bar application of the “insurrection” concept. To the extent of any lingering ambiguity, contra proferentem resolved the issue for coverage.

3) Judicial Notice: Recognition and Reliable Public Reports

The appellate court affirmed the district court’s careful use of judicial notice:

• Executive recognition: Courts may judicially notice that the President and Secretary of State recognized Guaidó as interim president. Because recognition is conclusive, that fact was not “reasonably disputable.”
• Public reports: The district court sifted specific statements from State Department, CRS, and UN reports and noticed only those facts not subject to reasonable dispute, declining to notice opinions or contested assertions. This precision avoided reversible error and ensured the jury was not misled.
• No prejudice: The reinsurers did not show prejudice; the noticed facts were largely background or cumulative of undisputed violence.

4) Causation: “Arising From” Means But-For Causation

The policy covers “loss … caused by … seizure … arising from” insurrection. The reinsurers urged proximate cause, relying on Pan Am. But Pan Am. addressed exclusions phrased as “due to or resulting from.” The Second Circuit followed New York’s Court of Appeals (Maroney and Burlington): “arising out of” (and by parity “arising from”) requires a but-for causal relationship—broader than proximate cause.

Two independent grounds defeated the reinsurers’ challenge:

• Waiver: At trial, defense counsel explicitly withdrew the causation-instruction objection after the court asked for a Rule 11-supported submission. A party cannot withdraw an objection and later appeal the jury instruction given.
• Merits: Even absent waiver, the instruction was correct. The contract’s “arising from” phrasing controls under New York law. If insurers want a proximate-cause requirement in a coverage grant, they must draft for it.

Impact

A. War-Risk and Political-Risk Coverage

• Recognition doctrine embedded in coverage analysis: Insureds and insurers must treat the U.S.-recognized government as the “constituted government” for war-risk terms, even if a different regime wields de facto control. This can invert traditional “insurgent vs. government” roles in volatile states.
• Insurrection can include acts of an incumbent regime: The decision expands the practical reach of “insurrection” to include violent power-retention measures by a de facto regime against the recognized sovereign, provided Pan Am.’s elements are met.
• Broader trigger for coverage: Ambiguity in inclusionary language will tilt toward coverage absent extrinsic drafting or negotiation evidence, especially in long-used market wordings (e.g., Institute War Clauses).

B. Contract Drafting and Claims Handling

• Drafting precision:
  • Define “insurrection” or incorporate recognition/de facto criteria expressly (e.g., “insurrection against the entity exercising de facto sovereign control”).
  • Specify causation standards: use “proximately caused by” or “solely and directly caused by” if proximate or efficient proximate causation is intended; avoid “arising from/out of” if but-for is not desired.
  • Consider carve-outs or clarifications for governmental seizures, sanctions, or competing-sovereignty disputes.
• Claims evidence:
  • Expect courts to take judicial notice of Executive recognition statements and reliable public reports for background facts.
  • Build records on intent, violence, and causal chains to meet “arising from” tests; “multiple but-for causes” can suffice under New York law.

C. Litigation Strategy

• Preservation matters: Withdrawing objections to jury instructions waives appellate review. Claims of duress from a Rule 11 reminder will not revive the objection.
• Judicial notice: Object with specificity at the statement level; generalized attacks on entire documents (e.g., “UN reports are unreliable”) are unlikely to succeed when a court has parsed discrete facts.
• Foreign law vs. recognition: Rule 44.1 submissions may be eclipsed by the recognition doctrine; frame arguments in terms of the legal consequences of recognition rather than the legitimacy of foreign officeholders.

Complex Concepts Simplified

• Insurrection (insurance meaning): A violent uprising aimed at overthrowing the recognized government and taking its powers. Intent to overthrow is key—even if success is unlikely.
• Constituted government: For U.S. courts, this is the government recognized by the U.S. President and State Department. Recognition is binding on domestic courts.
• Contra proferentem: If a policy term is ambiguous and cannot be clarified by extrinsic evidence, courts interpret coverage grants in favor of the insured.
• “Arising from” vs. “Proximately caused by”:
  • “Arising from/out of” = but-for causation; there needs to be some causal relationship.
  • “Due to” or “resulting from” (especially in exclusions) often signals proximate cause—a direct, primary cause without which the loss would not have occurred.
• Judicial notice: Courts accept as true certain indisputable facts from reliable sources without formal proof—for example, official recognition statements or specific historical facts in public reports.

Conclusion

CITGO v. Ascot Underwriting establishes two significant rules for war-risk insurance governed by New York law:

• An incumbent de facto regime can be the “insurrectionist” when it uses violence to retain power against the U.S.-recognized “constituted government,” as fixed by the recognition doctrine. De facto control does not immunize such acts from the “insurrection” label.
• The phrase “arising from” in a coverage grant imports a but-for causation standard. Insurers seeking narrower causation requirements must draft them expressly.

The decision also validates careful judicial notice practices in politically complex cases and underscores strict preservation requirements for jury-instruction challenges. As geopolitical volatility and recognition disputes intersect with trade and shipping, this opinion will guide how courts, insureds, and insurers assess war-risk coverage in environments where legal sovereignty and physical control diverge.

Key takeaway: In the absence of precise drafting, war-risk policies will be read expansively to cover losses tied by a but-for relationship to insurrectionary conditions as legally defined by U.S. recognition—even where the “insurrection” is carried out by the regime in physical control of the state.