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Venezuela oil export: Second Circuit upheld US$54M Citgo ruling
Legal note on a Citgo cargo seizure claim followed US intervention in Venezuela, as a New York appeals court backed a US$54M war-risks award
A client note circulated by New York law firm Chalos & Co, linked “this week’s developments in Venezuela” to a recent US appellate ruling on a war-risks insurance dispute tied to a Citgo-chartered cargo.
The note referred to the US Court of Appeals for the Second Circuit’s 28 October 2025 decision in CITGO Petro Corp v Ascot Underwriting Ltd, which addressed whether the Maduro faction in Venezuela should be treated as ’insurrectionists’ for the purposes of cover under an insurrection clause.
Chalos & Co said the dispute began when a Citgo-chartered ship carried a large quantity of oil and “Venezuelan authorities loyal to Maduro seized the cargo”.
It said Citgo determined it could not complete payment “since the producing company was a sanctioned entity”, adding that “Citgo could not safely conduct business with it”.
The note said the vessel was ultimately escorted by naval patrol “back to the Port of Jose to return the oil”, after which coverage was denied under “the insurance contract’s insurrection clause”.
In the New York litigation that followed, Chalos & Co said Citgo alleged “that an insurrection caused the loss of the cargo”, while the insurer argued the Maduro regime’s actions “were not part of an insurrection”.
The note said the trial court determined an insurrection occurred in Venezuela after January 2019, when “the Maduro government refused to cede power to the newly elected Guaidó”.
It said the court’s reasoning turned on ambiguity, describing how “insurrection was left undefined in the contract”, and that the court applied contra proferentem, “which requires ambiguity to be determined against the insurer if they drafted the contract”.
Chalos & Co noted the case proceeded to a jury, which found “that the loss of the crude ‘arose from’ the Maduro regime and its actions”.
The note characterised this as meaning the Maduro regime was “one of the major reasons why the loss occurred, but not necessarily the only one”, and said the plaintiff won a judgment of US$54M.
On appeal, the defendants argued the trial court erred on the insurrection finding, the admission of judicial notice, and its use of a ’but for’ causation standard, according to Chalos & Co.
The note said the Second Circuit affirmed the judgment in full, holding the trial court did not abuse its discretion because “the term insurrection was highly ambiguous in the contract”.
It added that the Second Circuit found the judicially noticed facts were acceptable because they came from “sources traditionally considered highly reliable”, and said the ’but for’ test, which “can recognise multiple causes”, was appropriate and, in any event, “waived for having not been preserved for appeal”.
The Chalos & Co note said the court decision against current political disruption in Venezuela, and the escalation to seizure of President Maduro and his extradition to New York, has left exports ’paralysed’ according to Reuters’ description.
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