Insurance coverage disputes often turn on a policy’s precise language and how courts interpret it. A court’s construction of even an ordinary term can decide whether an insured retains protection or faces substantial financial exposure. The Second Circuit recently underscored this reality, issuing multimillion‑dollar rulings on the meanings of “insurrection,” “accident,” and “misappropriation,” each with profound consequences for the parties involved.

“Insurrection” 

In CITGO Petroleum Corp. v. Ascot Underwriting Ltd., 158 F.4th 368 (2d Cir. 2025), CITGO insured roughly one million barrels of crude oil bought from Venezuela’s state-owned PDVSA under a marine-cargo reinsurance policy that covered losses “arising from risks” including “insurrection.” The oil was loaded in January 2019, but U.S. sanctions prevented CITGO from paying for it, creating an ownership dispute. In 2020, the Venezuelan military seized the vessel and returned the oil to PDVSA.

CITGO filed a claim, arguing that the political turmoil in Venezuela – including President Nicolás Maduro’s contested hold on power, the opposition-controlled National Assembly, and the U.S.-recognized interim president Juan Guaidó – constituted “insurrection” under the policy. The reinsurers denied coverage, asserting a narrower interpretation.

Applying the contra proferentem rule, the Second Circuit (Judges Chin, Pérez, and Nathan), found the term “insurrection” ambiguous and construed it in favor of the insured. The court adopted its prior definition of insurrection as “a violent uprising by a group or movement acting for the specific purpose of overthrowing the constituted government and seizing its powers.” It held that Maduro’s campaign to retain power, including overthrowing a recognized government, satisfied that definition. 

The court found that the district court did not abuse its discretion in taking judicial notice of the U.S. Executive Branch’s recognition of Juan Guaidó as Venezuela’s interim president, citing the State Department, Congressional Research Service, and United Nations as reliable authorities and observing that the reinsurers failed to identify any improper facts.  Consequently, the district court’s summary judgment ruling in favor of CITGO was affirmed, awarding the company $54,235,187.24 plus interest.

“Accident” 

In Granite State Ins. Co. v. Primary Arms, LLC, 161 F.4th 160 (2d Cir. 2025), the Second Circuit considered whether a liability insurance policy that covers “accidents” obligated insurers to defend a firearms-component retailer sued by New York State and the cities of Buffalo and Rochester. Primary Arms, a Texas retailer, shipped more than 25,000 unfinished frames and receivers to New York, allegedly marketing the parts as a way to bypass background check requirements and produce untraceable “ghost guns.” The state and the cities alleged that this conduct caused a surge in ghost-gun-related crime and economic harm. 

After Primary Arms sought coverage, two insurers filed a declaratory judgment action asserting that the policies only cover damages arising from an accident, i.e., a fortuitous, unexpected, and unintended event. The Southern District of New York (Hon. Lorna G. Schofield) dismissed Primary Arms’ defense and indemnity claims, and the Second Circuit affirmed.

The court (Judges Chin, Nardini, and Kahn) held that the pleadings alleged intentional, profit-driven marketing of illegal firearm components to prohibited persons, not an accidental occurrence. As a result, the claims did not satisfy the policy’s accident definition, and the insurers owed no duty to defend or indemnify. The court rejected Primary Arms’ reliance on a subjective seller-expected-injury test and instead applied the traditional “accident” test, which deems an injury non-accidental when it ordinarily results from an intentional act. Moreover, the court determined that whether the parts qualified as “firearms” was irrelevant to the accident analysis under the insurance policies.

 “Misappropriation”

In Marcus & Cinelli, LLP v. Aspen American Insurance Co., 158 F.4th 333 (2d Cir. 2025), a law firm sued its insurer for defense and indemnity after a former client alleged that the firm facilitated the sale of her diamond ring (valued at $8.5 million), took the proceeds despite a restraining notice, and committed fraudulent conveyance, tortious interference, and contempt. The insurer denied coverage, arguing the claims did not involve “professional services” under the policy and that the policy’s “misappropriation” exclusion barred any duty to defend or pay for losses, destruction, diminution, misappropriation, or failure to account for assets in the firm’s care, including commingling of funds.

The Western District of New York (Judge John L. Sinatra, Jr.) dismissed the firm’s defense and indemnity claims, holding that the policy’s misappropriation exclusion barred coverage.

The Second Circuit was divided. Judges Robinson and Pérez held that the allegations – facilitating the sale and managing the proceeds – arose from the firm’s rendering of professional services, triggering a duty to defend, and that “misappropriation” under the policy requires unauthorized use of another’s property, which the complaint did not allege. They vacated the district court dismissal and remanded for further proceedings. 

Judge Parker dissented, agreeing with the district court that the firm knowingly sold the ring despite a restraining notice, thus constituting misappropriation and excusing the insurer from any duty to defend.

Conclusion

The Second Circuit’s recent decisions illustrate its commitment to applying the plain text of an insurance policy. “Insurrection” triggered coverage, “accident” foreclosed it, and “misappropriation” divided the panel, each outcome driven by the judges’ construction of the policy language. Although the financial stakes were significant, the court’s methodology remained consistent: the policy’s ordinary meaning controls. For both insurers and policyholders in the Second Circuit, risk allocation begins and ends with the words chosen.