Citgo Petroleum Corporation v. Ascot Underwriting Limited

Background

Citgo Petroleum Corporation sought coverage under an insurance policy for crude oil cargo that was loaded onto the M/T Gerd Knutsen in Venezuela and later removed after Venezuelan military vessels and representatives compelled the vessel to enter port. The policy excluded losses arising from capture, seizure, arrest, restraint, or detention, but restored coverage for such losses arising from war, civil war, revolution, rebellion, insurrection, or related civil strife. The policy was governed by New York law.

Citgo argued that the loss arose from an insurrection because Nicolás Maduro and his supporters used violence to retain power and prevent Juan Guaidó, whom the United States recognized as Venezuela’s interim president, from exercising authority. The defendants argued that no insurrection occurred because Maduro’s forces retained actual control over Venezuela and Guaidó never exercised meaningful power inside the country. Citgo also sought judgment that it owned the cargo when it was lost and asked the court to decide the legal standard for causation.

Judicial Notice

The court granted in part and denied in part Citgo’s motion for judicial notice. It took notice of statements by former President Donald Trump and former Secretary of State Michael Pompeo as evidence of the United States government’s official position recognizing Guaidó, but not as proof that the factual assertions underlying those statements were true. The court also judicially noticed some, but not all, facts drawn from State Department, Congressional Research Service, and United Nations reports. It declined to notice disputed or opinion-based characterizations.

Insurrection Under the Policy

The court applied the definition of “insurrection” used in Pan American World Airways, Inc. v. Aetna Casualty & Surety Co.: a violent uprising by a group or movement acting specifically to overthrow the constituted government and seize its powers. The court held that the term was ambiguous as applied to the unusual circumstances in Venezuela. United States recognition required the court to treat Guaidó as Venezuela’s constituted government during the relevant period, even though Maduro retained most actual governmental power inside Venezuela.

The court found that reasonable people could disagree about whether an insurrection requires the targeted government to possess a particular level of actual power. The parties did not provide meaningful evidence of their intent when they entered the insurance policy that could resolve this ambiguity. Under New York law, the court therefore interpreted the ambiguity against the insurers and in favor of coverage.

With that interpretation, the court held that Maduro’s actions constituted an insurrection within the meaning of the policy. It found that Maduro and his allies engaged in repeated violence against members and supporters of the National Assembly, sought to prevent that body from governing, stated an intention to use force rather than votes, and acted to seize the powers Guaidó was entitled to wield.

Cargo Ownership and Causation

The court granted Citgo summary judgment on the defendants’ defense that Citgo did not own the cargo. The sales agreement provided that title and risk of loss passed from PDVSA to Citgo when the crude oil passed into the vessel’s cargo manifold. Because the parties agreed that the cargo was lost after it was loaded onto the Gerd, the court held that Citgo owned it when it was lost. The court rejected the defendants’ arguments concerning Citgo’s alleged failure to pay because those arguments did not establish that Citgo lacked ownership under the agreement.

The court denied as premature Citgo’s request for a ruling on the legal causation standard. It explained that factual disputes remained about the connection between any insurrectionary acts and the cargo’s loss, so deciding the issue at that stage could have produced an advisory opinion.

Disposition

Judge Gregory H. Woods ruled that Citgo’s motion for summary judgment was granted in part and denied in part; the defendants’ motion for summary judgment was denied; and Citgo’s motion for judicial notice was granted in part and denied in part. The court granted Citgo judgment on the insurrection issue and cargo ownership, but did not resolve causation.