USA – NEW YORK Trends and Developments Contributed by: Bradley Nash, John Curley and Dorothea Regal, Hoguet Newman Regal & Kenney, LLP
Citing the insurrection language of the Policy, CIT- GO submitted a claim for insurance. The reinsurers denied coverage, and CITGO sued for breach of con- tract. Following discovery, the parties cross-moved for summary judgment. The district court granted CITGO’s motion in part, finding as a matter of law that the losses were covered because they arose from an “insurrection”, and directed a trial on causa- tion and damages. A jury awarded CITGO damages of USD54,235,187.24 plus interest, and the reinsurers appealed both the district court’s summary judgment decision and its jury instruction on causation at trial. The appellate court affirmed the district court’s sum- mary judgment decision that CITGO’s losses were covered by the Policy’s insurrection clause. Because the Policy did not define “insurrection”, the Court looked to how it had interpreted the term in a prior decision. In Pan American World Airways, Inc. v Aetna Casualty & Surety Co. , 505 F.2d 989, 1017 (2d Cir. 1974), the Second Circuit defined “insurrection” as “(1) a violent uprising by a group or movement (2) act- ing for the specific purpose of overthrowing the con- stituted government and seizing its powers”. The Court then applied this definition to the facts in the summary judgment record and determined that the evidence was undisputed that the situation in Ven- ezuela was an insurrection as defined by Pan Am.: Maduro and his allies used violence with the aim of
remaining in power “notwithstanding the actions of the duly constituted government” (and, the Court explained, whether Guaidó’s government was “duly constituted” was conclusively resolved by the US gov- ernment’s official recognition that Guaidó was Ven- ezuela’s interim president). The Court went on to explain that even if there were doubts as to Maduro’s violence or his intent, the rule of contra proferentem would tip the case in CITGO’s favour because an ambiguity in what “insurrection” means must be resolved against the reinsurers as the policy drafters. The reinsurers also appealed the district court’s jury instructions, arguing that the Policy’s “arising from” language necessitated a jury instruction on proximate cause. The Court held that the reinsurers waived this argument when, at trial, they withdrew their objection to the jury instructions after the district court asked for a signed letter, subject to sanctions for frivolity, due the next day explaining the basis for the proximate cause instruction. In any event, the Court continued, the Reinsurers’ argument would fail even if they had not waived their objection because, under well-established law, the term “arising out of” requires a but-for causation analysis under New York law.
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