As an international centre of business and finance, New York is a frequent venue for high-stakes insurance coverage disputes. This past year was no exception in this regard. In 2025, state and federal courts in New York grappled with the insurance implications of a host of headline-grabbing topics, from claims involving environmental contamination by so-called forever chemicals to the fallout of civil unrest resulting from contested elections in Venezuela. Some of the leading New York insurance law cases the firm has been following this year include:

• a federal district court decision concerning coverage under a commercial general liability (CGL) policy for a per- and polyfluoroalkyl substance (PFAS)-related environmental claim;
• a New York state appellate decision concerning the standard for determining whether multiple claims are “related” (and therefore deemed to constitute a single claim) under a claims-made liability policy;
• a rare court decision concerning the method for allocating a settlement between covered and non-covered loss under a D&O policy; and
• a Second Circuit decision concerning whether the refusal of the recently-deposed Venezuelan president Maduro to cede power following 2018 elections constituted an “insurrection”, triggering coverage under a marine cargo policy for a seizure of crude oil.

CGL Insurer Required To Provide Defence Coverage for a PFAS-Related Environmental Claim

In Town of Harrietstown v Westchester Fire Ins. Co., 2025 WL 2391758 (N.D.N.Y. Aug. 18, 2025), a federal district judge held that a municipality’s liability insurer was required to provide defence coverage for a PFAS-related environmental contamination claim at a regional airport, holding that a carve-out to the policy’s pollution exclusion for claims “caused by or resulting in a crash fire explosion or collision” preserved coverage.

The policyholder, Town of Harrietstown, owns and operates Adirondack Regional Airport in upstate New York. Pursuant to regulations of the Federal Aviation Administration, the airport used aqueous film-forming foam (AFFF) to extinguish fires – a product that is known to contain PFAS.

The airport was required by the Federal Aviation Administration to use AFFF to extinguish fires. AFFF is known to contain PFAS. A New York state environmental agency (the Department of Environmental Conservation) brought an environmental contamination claim against the Town and issued a Superfund Site Classification Notice, identifying the airport as a “significant threat to public health and/or the environment” due to PFAS contamination.

The Town sought coverage for its insurers under an airport owners and operators general liability policy. After initially providing a defence, subject to a reservation of rights, the insurers disclaimed any duty to defend by invoking the policy’s pollution exclusion. The Town brought a coverage action.

At issue was the interplay of two provisions in the policy’s pollution exclusion. First, the policies excluded coverage for claims “directly or indirectly occasioned by, happening through or in consequence of... pollution and contamination of any kind whatsoever”, “unless caused by or resulting in a crash fire explosion or collision or a recorded in-flight emergency causing abnormal aircraft operation”. Separately, the policy’s “Combined Claims” provision stated that the insureds “shall not be required to defend... a claim or claims covered by the policy when combined with any claims excluded”, but would only reimburse the insureds for that portion of its defence costs that “may be allocated to the claims covered by the policy”.

The underlying New York State Department of Environmental Conservation (NYSDEC) claim was vague as to the cause of the airport’s PFAS contamination. However, it was undisputed that “one alleged source of contamination at the Airport is firefighting foam that was used in response to crashes or similar events” (id, at *18). Thus, the court held that the Town had met its burden to establish that the pollution exclusion’s exception for pollution caused by “a crash fire explosion” was at least potentially triggered (id). The insurers accordingly “have a duty to defend the Town unless and until that possibility is foreclosed ‘with certainty’” (id).

Next, the insurers argued that the “Combined Claims” provision was triggered because the underlying contamination claim involved a mix of covered and uncovered causes. Accordingly, the insurers contended that they should have no duty to pay any defence costs until the insured could establish a basis to allocate a portion of the defence costs to a covered cause of loss. The court rejected this argument, holding that the insurers had misconstrued the meaning of the term “claim”. The policy did not define the term, but applying its plain meaning (ie, “a demand by a third party against the insured for money damages or other relief”), the court determined that there was only one “claim” – the environmental contamination proceedings commenced by the NYSDEC (id, at *12–13). A single claim with multiple underlying causes was nevertheless a single claim, and the “Combined Claims” provision was therefore inapplicable.

Related Claims Under Claims-Made Liability Policies

Claims-made liability policies generally cover claims made against the insured during the policy period. However, there is an important exception. Many policies have provisions that treat “related claims” as a single claim made at the time the earliest such claim was brought.

The Appellate Division, First Department (New York intermediate appellate court in Manhattan) construed such a related claims provision in Zurich Am. Ins. Co. v Giordio Armani Corp., 238 A.D.3d 81 (1st Dep’t 2025), holding that three lawsuits by separate plaintiffs alleging sexual harassment and assault by an employee of Giordio Armani Corp. (GAC), Javier Herrera, were sufficiently related to be deemed a single claim. The policy defined as related “all Wrongful Acts that have as a common nexus any fact, circumstance, situation, event, transaction, cause or series of causally connected facts, circumstances, situations, events, transactions or causes”.

GAC faced three separate lawsuits based on Herrera’s alleged misconduct. Although brought by separate plaintiff’s, each was premised on allegations of GAC’s knowledge of – and failure to address – Herrera’s actions. Reversing the trial court’s decision in favour of the insured, the Appellate Division observed that the policy provided a “broad test” for relatedness. The motion court had relied on the Court of Appeals’ decision in Roman Catholic Diocese of Brooklyn v National Union Fire Ins. Co. of Pittsburgh, Pa., 21 N.Y.3d 139, 969 (2013), which “addressed whether separate acts constituted a single ‘occurrence’”. But the Appellate Division found this precedent inapplicable to the related claims analysis. The court held that the three actions for which GAC sought coverage met the standard because they all alleged the same misconduct, with the later filed complaint expressly referencing the other claimants’ earlier-filed allegations. Indeed, that complaint relied on the earlier allegations for its theory of liability, asserting that but for GAC’s failure to take action after receiving the earlier reports of Hererra misconduct subsequent victims would not have been harmed. This element of overlapping causation among the three actions appears to have distinguished the GAC case from previous New York decisions holding that mere allegations that separate transactions “were part of a larger scheme” are “insufficient to enmesh otherwise distinct claims” under a policy’s related claims provision (Alvarez v XL Specialty Ins. Co., 202 A.D.3d 566, 567 (1st Dep’t 2022); see also Home Ins. Co of Ill. (N.H.) v Spectrum Information Techs., 930 F. Supp. 825, 851 (E.D.N.Y. 1996) (“bald allegations” of a common “conspiracy are insufficient to enmesh otherwise distinct claims”)).

This decision highlights the fact-intensive nature of the relatedness, and the court’s careful consideration of the precise wording of the policy provisions.

Loss Allocation Under D&O Policies

Flextronics Int’l, Ltd. v Allianz, 2025 WL 3168187 (S.D.N.Y. Nov. 13, 2025), examines an often disputed, but less-frequently litigated, issue in the realm of D&O coverage: the allocation of a settlement payment between covered and non-covered loss. Some policies have express provisions mandating a particular allocation methodology or requiring the insurer and the insureds to use “best efforts” to negotiate a reasonable allocation. In the absence of an express policy provision, the courts have taken two main approaches.

The larger settlement rule

The first allocation method – originally articulated by the Seventh and Ninth Circuits and later adopted by the Delaware Supreme Court – is the so-called larger settlement rule. Under this approach, the insurer must pay for the full loss, unless it can demonstrate that non-covered claims, or the conduct of non-covered parties, increased the amount of the loss (see Harbor Ins. Co. v Cont’l Bank Corp., 922 F.2d 357, 367 (7th Cir. 1990) (“To the extent that the amount for which Continental settled was larger than it would have been but for the misfeasance of these other persons—either noninsured persons or persons against whom no claim was made—Continental’s entitlement to reimbursement in this suit would be cut down”); Nordstrom, Inc. v Chubb & Son, Inc., 54 F.3d 1424, 1433 (9th Cir. 1995) (“Only if the corporation were liable for a claim for which the directors and officers lacked any responsibility, or if the corporate liability increased the amount of loss, would the amount of liability exceed that amount for which Federal was ‘legally obligated’ to pay”); RSUI Indem. Co. v Murdock, 248 A.3d 887, 908 (Del. 2021) (“broadly speaking, a loss is fully recoverable unless the insurer can show that the liability for non-covered conduct increased the insurer’s liability”)). Under this approach, if the settlement amount would have been the same whether or not the underlying complaint named non-covered individuals or asserted non-covered theories of liability, the insurer must fund the entire settlement.

The relative exposure rule

Other courts have apportioned the insurer’s responsibility for a settlement involving covered and non-covered parties “according to the relative exposures of the respective parties” in the underlying litigation. See, e.g., PepsiCo, Inc. v Cont’l Cas. Co., 640 F. Supp. 656, 662 (S.D.N.Y. 1986); see also Clifford Chance Ltd. Liab. P’ship v Indian Harbor Ins. Co., 41 A.D.3d 214 (1st Dep’t 2007) (“insurer is only required to pay a portion of its insured’s claim for reimbursement of the settlement amount based on a determination of the insured’s and the uninsured’s relative exposures in the litigation and the benefits received from the settlement”). Again, the insurer must “bear the ultimate burden of proving what amount of the settlement cost should be excluded from the policy coverage” (PepsiCo, 640 F. Supp. at 662).

The Flextronics case

The Flextronics case arose from a USD42 million settlement of an underlying trade secrets litigation. The insured negotiated allocation with its primary insurer and two of its excess insurers, but proceeded to arbitration with Allianz. The matter ultimately came before Judge Engelmayer of the Southern District of New York (SDNY) on Allianz’s motion to vacate the arbitral panel’s award. The panel applied the relative exposure rule, but nevertheless made a 100% allocation to covered loss, finding that the insurer failed to meet its burden to prove the amount that should be excluded from coverage. Applying the deferential standard for judicial review of arbitration awards, Judge Engelmayer held that the panel “did not manifestly disregard the law or the parties’ agreement” (2025 WL 3168187, at *20). Even under the relative exposure rule, a 100% allocation to covered loss was appropriate because Allianz “‘failed to produce any credible evidence’ to exclude any of th[e] loss from coverage” (id, at *19). Allianz’s expert applied a “per capita” allocation method: that is, he “simply took the number of parties, namely six, and since four were covered persons, he allocated one-third of the loss” to the uninsured entities. But the same expert “readily admitted” that this approach was “not based on industry custom or practice” (id, at *14). The Court held that the panel properly rejected the per capital methodology, and since Allianz bore the burden of proof, none of the loss was excluded from coverage.

Allianz was also unsuccessful in its argument that Flextronics failed to comply with a policy provision requiring the parties to “use their best efforts to determine a fair and proper allocation of loss”. Judge Englemeyer upheld the panel’s determination that Flextronics had satisfied this obligation, which requires “doing a reasonable job to accomplish allocation”, and is necessarily “a very subjective standard” that “depends on specific facts” (id, at *17). While Flextronics did not extend the same allocation offers to Allianz that it made to other insurers, the Court agreed with the panel that it had no obligation to do so. Flextronics engaged in “an iterative negotiation process” with Allianz that satisfied the “best efforts” standard (id).

The Flextronics decision offers a useful primer on loss allocation in complex D&O coverage matters. The outcome underscores that it is the insurer’s burden, under the relative exposure rule, to articulate a principled allocation theory. And if the insurer fails to satisfy that burden, the insured is entitled to full coverage.

“Insurrection” Coverage

In CITGO Petroleum Corporation v Ascot Underwriting Ltd., 158 F.4th 368 (2d Cir. 2025), the Second Circuit affirmed a victory for CITGO Petroleum Corporation (CITGO), holding that oil seized in Venezuela was covered by a marine cargo reinsurance policy (the “Policy”) that provided coverage for losses caused by an “insurrection”. On appeal, the reinsurers argued Venezuela’s instability did not qualify as an insurrection, and they also urged a proximate-cause standard (rather than but-for) for the loss.

In October 2012, Hugo Chávez won re-election for a six-year term as president of Venezuela, but he died in early 2013 and his Vice President, Nicolás Maduro, was elected to serve the remainder of the term. When the opposition party came to power in Venezuela’s National Assembly, Maduro and his supporters began targeting those politicians.

In 2018, Maduro called for a presidential election and claimed that he won, but the National Assembly rejected the election as illegitimate and declared Juan Guaidó to be the interim president until fair elections could be held. Maduro refused to cede control of the government.

Meanwhile, on 25 January 2019, the USA recognised Guaidó as the legitimate president of Venezuela. The USA also extended existing sanctions to cover several new entities, including the state-owned Petroleos de Venezuela, S.A. (PDVSA).

In 2016, CITGO purchased oil from PDVSA, to be delivered between 2018 and 2021. The purchase agreement transferred assignment and risk for the oil from PDVSA to CITGO once loaded onto the delivery vessel. To insure the oil, CITGO purchased the Policy, which contained an “Institute War Clauses (Cargo)” condition that provided in relevant part that the Policy covered loss or damage “arising from... war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power”.

On 27 January 2019, a vessel chartered by CITGO to carry nearly 1 million barrels of oil from Venezuela to Aruba – the Gerd – requested clearance to depart Venezuela the next day, but was never given clearance because the US sanctions, instituted two days earlier, did not allow CITGO to pay PDVSA. A standoff ensued between CITGO and PDVSA, which both claimed ownership of the oil that had been loaded on board the vessel. In February 2020, representatives of the Venezuela military and of PDVSA, accompanied by a Venezuelan military vessel, ordered the captain of the Gerd to return the oil to PDVSA. The captain issued a formal letter of protest but then complied with the command.

Citing the insurrection language of the Policy, CITGO submitted a claim for insurance. The reinsurers denied coverage, and CITGO sued for breach of contract. 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 causation 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 summary 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) acting for the specific purpose of overthrowing the constituted 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 Venezuela 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 government’s official recognition that Guaidó was Venezuela’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.