21-2570(L)

Covington Specialty Ins. Co. v. Indian Lookout Country Club, Inc.

United States Court of Appeals

For the Second Circuit

August Term 2022

Argued: February 9, 2023

Decided: March 22, 2023

Nos. 21-2570(L), 21-2618(Con)

COVINGTON SPECIALTY INSURANCE COMPANY,

Plaintiff–Counter-Defendant–Appellee,

v.

INDIAN LOOKOUT COUNTRY CLUB, INC.,

Defendant–Counter-Claimant–Appellant,

FRANCIS POTTER, INDIVIDUALLY, DBA INDIAN 

LOOKOUT COUNTRY CLUB, INC., ANTOINETTE 

POTTER, INDIVIDUALLY, DBA INDIAN LOOKOUT 

COUNTRY CLUB, INC., HARLEY RENDEZVOUS 

CLASSIC, INC.,

Defendants–Counter-Claimants–

Counter-Defendants–Appellants.*

Appeal from the United States District Court for 

the Northern District of New York

No. 20-cv-613, Glenn T. Suddaby, Judge.

* The Clerk of Court is respectfully directed to amend the official case caption as set forth above.
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Before: KEARSE, JACOBS, and SULLIVAN, Circuit Judges.

Insureds – who operate an annual motorcycle rally in Pattersonville, New 

York (the “Harley Rendezvous”) – appeal from the district court’s entry of 

summary judgment in favor of Covington Specialty Insurance Company 

(“Covington”) in this insurance-coverage dispute. Specifically, the parties 

disagree as to Covington’s duties, under a general commercial liability policy 

issued to the Insureds (the “Policy”), to defend and indemnify the Insureds against 

personal-injury claims asserted in a separate, state-court action by two motorcycle 

riders who were struck by another attendee’s automobile at the Harley 

Rendezvous. The district court (Suddaby, J.) found that a provision of the Policy 

(the “Absolute Auto Exclusion”) unambiguously excluded liability coverage for 

automobile accidents, regardless of whether the Insureds themselves owned or

operated the vehicle at issue. 

On appeal, the Insureds argue that the district court was bound by – and 

erroneously failed to follow – a case in which a New York intermediate appellate 

court found ambiguity in a similarly worded exclusion provision in a different 

insurance policy. See Essex Ins. Co. v. Grande Stone Quarry, LLC, 918 N.Y.S.2d 238 

(3d Dep’t 2011). As explained below, however, we find that Grande Stone Quarry 

is inapposite here, and that countless other decisions by New York courts support 

the district court’s reading of the Absolute Auto Exclusion. As a result, we 

AFFIRM the judgment of the district court. 

AFFIRMED.

ERIC D. SUBEN, Traub Lieberman Straus &

Shrewsberry LLP, Hawthorne, NY, for 

Plaintiff–Counter-Defendant–Appellee

Covington Specialty Insurance Company.

CAROLYN B. GEORGE, Cooper, Erving & 

Savage, LLP, Albany, NY, for Defendant–

Counter-Claimant–Appellant Indian Lookout 

Country Club, Inc.
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MATTHEW J. KELLY, Roemer Wallens Gold & 

Mineaux, LLP, Albany, NY, for Defendants–

Counter-Claimants–Counter-Defendants–

Appellants Francis Potter, Antoinette Potter, 

Harley Rendezvous Classic, Inc.

PER CURIAM:

Francis and Antoinette Potter, Indian Lookout Country Club, Inc.

(the “Club”), and Harley Rendezvous Classic, Inc. (collectively, the “Insureds”) –

who operate an annual motorcycle rally in Pattersonville, New York (the “Harley 

Rendezvous,” or the “Rendezvous”) – appeal from the district court’s entry of 

summary judgment in favor of Covington Specialty Insurance Company 

(“Covington”) in this insurance-coverage dispute. Specifically, the parties

disagree as to Covington’s duties, under a general commercial liability policy 

issued to the Insureds (the “Policy”), to defend and indemnify the Insureds against 

personal-injury claims asserted in a separate state-court action brought by two 

motorcycle riders (the “Riders”) who were struck by an automobile driven by 

someone attempting to attend the Harley Rendezvous. The district court found

that a provision of the Policy (the “Absolute Auto Exclusion”) made 

“unambiguously clear that [liability coverage for] automobile accidents [is]
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excluded” from the Policy, regardless of “whether . . . the [I]nsured[s] themselves 

owned [or] operated . . . the vehicle at issue.” J. App’x at 10, 12. 

On appeal, the Insureds argue that the district court was bound by – and 

erroneously failed to follow – a case in which a New York intermediate appellate 

court found ambiguity in a similarly worded exclusion provision of a different 

insurance policy. See Essex Ins. Co. v. Grande Stone Quarry, LLC, 918 N.Y.S.2d 238 

(3d Dep’t 2011). As explained below, however, Grande Stone Quarry is inapposite 

here, and numerous other decisions by New York courts support the district 

court’s reading of the Absolute Auto Exclusion. As a result, we affirm the 

judgment of the district court.

I. BACKGROUND

A. Facts

At the heart of this appeal is the Policy, which Covington issued to the 

Insureds for the period of July 11, 2018 to July 11, 2019. The Policy provides that 

Covington (1) “will pay those sums that the [Insureds] become[] legally obligated 

to pay as damages because of bodily injury or property damage to which this 

insurance applies,” and (2) “will have the right and duty to defend the [Insureds] 

against any suit seeking [such] damages,” but “will have no duty to defend the 
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[Insureds] against any suit seeking damages for bodily injury or property damage 

to which this insurance does not apply.” J. App’x at 119 (internal quotation marks 

omitted). The Policy contains a standard exclusion specifying that “[t]his 

insurance does not apply” to “[b]odily injury . . . arising out of the . . . use . . . of 

any aircraft, auto[,] or watercraft owned or operated by . . . any insured.” Id. at 120, 

122 (emphasis added; internal quotation marks omitted). 

The Absolute Auto Exclusion, however, “delete[s]” and “replace[s]” that 

standard exclusion with a disclaimer of coverage for any “[b]odily injury . . . 

arising out of or resulting from the . . . use . . . of any aircraft, auto[,] or watercraft.” 

Id. at 153 (internal quotation marks omitted). Unlike the standard exclusion it 

replaces, the Absolute Auto Exclusion contains no language conditioning its 

disclaimer on whether the “aircraft, auto[,] or watercraft” in question was “owned 

or operated by . . . an[] insured.” Id. at 122 (internal quotation marks omitted). 

Moreover, the Absolute Auto Exclusion clarifies that “[t]his exclusion applies even 

if the claims against any insured allege negligence or other wrongdoing in the 

supervision . . . or monitoring of others by that insured, if the occurrence which 

caused the bodily injury . . . involved the . . . use . . . of any aircraft, auto[,] or 

watercraft.” Id. at 153 (internal quotation marks omitted). 
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This dispute arises out of a June 21, 2019 automobile-motorcycle collision 

between parties attempting to attend the Harley Rendezvous. The Riders were 

entering the premises of the Club to attend the Rendezvous when the driver of a 

Kia automobile (the “Driver”) – also “attempt[ing] to enter [the Rendezvous] at 

[the Club’s] premises” – allegedly “failed to yield the right of way and turned her 

vehicle left into the direct path of the [Riders], causing a severe collision and 

injuries to both [Riders].” J. App’x at 188 ¶ 14. The Riders then commenced a 

personal-injury action against both the Driver and the Insureds in state court

(the “Underlying Action”), alleging that the Driver was negligent in the operation 

of her automobile and that the Insureds were negligent in their supervision of the 

vehicular traffic entering and exiting the Club’s premises for the Rendezvous.

In December 2019, the Insureds notified Covington of the Underlying 

Action in a letter stating their “belie[f]” that the “[P]olicy . . . would cover” their

defense and indemnity against the Riders’ “claim[s].” Id. at 193. Later that 

month, Covington responded with a letter “denying coverage for the Underlying 

Action based on . . . the ‘Absolute Auto . . . Exclusion’ endorsement” contained in 

the Policy. Id. at 195. Covington thus “advised that [it] will not appoint counsel 

to defend [the Insureds],” “pay or contribute to [their] defense costs,” or “pay 
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[any] judgment, verdict, or settlement against [them].” Id. at 196. Upon learning 

that the Riders had moved for a default judgment against the Club in the 

Underlying Action, however, Covington “assign[ed] defense counsel to represent

[the Club]” for the limited “purpose of opposing the default motion.” Id. at 249. 

In advising the Insureds of this putatively “gratuitous” defense, id. at 280, 

Covington emphasized that “it is to be strictly understood that [Covington] does 

not waive [any of] the grounds for disclaiming coverage as previously asserted,” 

including that “[t]he Absolute Auto Exclusion excludes coverage for the 

Underlying Action because it arises out of an auto accident,” id. at 249–50.

B. Procedural History

In June 2020, Covington commenced this declaratory-judgment action in the 

district court, seeking (1) a declaration that, under the Absolute Auto Exclusion 

(and other Policy endorsements not relevant to this appeal), it need not indemnify 

the Insureds for any liability established in the Underlying Action; and (2) 

recoupment of the costs it had incurred in providing the Club with a putatively 

gratuitous defense in the Underlying Action. The Insureds then filed 

counterclaims seeking declarations that, under the Policy, Covington was

obligated to defend and indemnify them in the Underlying Action. 
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In February 2021, Covington moved for summary judgment on the ground 

that the Absolute Auto Exclusion precludes coverage for the Insureds’ liabilities 

in the Underlying Action, as the Underlying Action had undisputedly arisen out 

of an automobile accident. The Insureds opposed the motion, asserting 

ambiguity as to whether the Absolute Auto Exclusion (like the standard exclusion 

it replaces) applies only to bodily injuries caused by automobiles owned or 

operated by insured parties, and arguing that under New York law, such ambiguity 

must be construed in the Insureds’ favor. On September 21, 2021, the district 

court granted summary judgment in favor of Covington.

The Insureds timely appealed.

II. STANDARD OF REVIEW

“We review de novo a district court’s decision to grant summary judgment, 

construing the evidence in the light most favorable to the party against whom 

summary judgment was granted and drawing all reasonable inferences in that 

party’s favor.” Bey v. City of New York, 999 F.3d 157, 164 (2d Cir. 2021). 

“Summary judgment is required if ‘there is no genuine dispute as to any material 

fact and the movant is entitled to judgment as a matter of law.’” United States v. 

Sum of $185,336.07 U.S. Currency Seized from Citizen’s Bank Acct. L7N01967, 731 F.3d 
9

189, 192 (2d Cir. 2013) (quoting Fed. R. Civ. P. 56(a)). Likewise, “[w]e review de 

novo the district court’s interpretation and application of state law.” Principal 

Nat'l Life Ins. Co. v. Coassin, 884 F.3d 130, 134 (2d Cir. 2018) (citation and alteration 

omitted).

III. DISCUSSION

The Insureds’ sole argument on appeal is that the district court erred in 

finding the language of the Absolute Auto Exclusion to unambiguously preclude 

coverage here. That was error, according to the Insureds, because a New York 

intermediate appellate court once found ambiguity in a similarly worded 

exclusion provision of a different insurance policy. See Essex Ins. Co. v. Grande 

Stone Quarry, LLC, 918 N.Y.S.2d 238 (3d Dep’t 2011). We disagree.

It is true that since the district court was “sitting in diversity,” it was bound 

to “apply the substantive law of the forum [s]tate” – here, New York. Principal 

Nat'l Life, 884 F.3d at 134 (citation omitted). It is also true that since “the New 

York Court of Appeals . . . has not ruled on th[e] issue” in dispute here, the district 

court was “bound . . . to apply the law as interpreted by New York’s intermediate 

appellate courts . . . unless [it were to] find persuasive evidence that the New York 

Court of Appeals . . . would reach a different conclusion.” AEI Life LLC v. Lincoln 
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Benefit Life Co., 892 F.3d 126, 139 n.15 (2d Cir. 2018) (citation omitted). Here,

however, the district court was not bound to follow the Third Department’s 

decision in Grande Stone Quarry – indeed, it was correct in declining to follow that 

decision – for the simple reason that Grande Stone Quarry did not speak to the issue 

disputed by Covington and the Insureds.

Seizing on the fact that “the words ‘any insured’ are merely omitted” by the 

Absolute Auto Exclusion – rather than affirmatively replaced with words such as 

“any insured or any other persons” – the Insureds argue that the Absolute Auto 

Exclusion is ambiguous as to whether it “only applie[s] to . . . autos used by [the 

Insureds] and their employees,” or also applies to automobiles used by others 

(such as the Driver in the Underlying Action). Potter Br. at 13–14. In making 

this argument, the Insureds double down on the Third Department’s opinion in 

Grande Stone Quarry, which found similar wording to be ambiguous as to a different

question: whether the similarly worded exclusion “extinguished” liability 

coverage “for claims resulting from third parties[’] using such vehicles when 

injured by a condition of the insured’s property.” 918 N.Y.S.2d at 241 (emphasis 
11

added).1 Because Grande Stone Quarry did not address the issue before the district 

court here – that is, whether the Absolute Auto Exclusion unambiguously 

extinguishes liability coverage as to third parties injured by another third party's 

vehicle – it has minimal value as an “indicator[] of how the [New York] Court of 

Appeals would decide” that issue. Reddington v. Staten Island Univ. Hosp., 511 

F.3d 126, 133 (2d Cir. 2007) (internal quotation marks omitted), certified question 

answered, 11 N.Y.3d 80 (2008). 

Instead, as noted above, the district court’s “task” here was simply “to 

determine how the New York Court of Appeals would decide” the issue, id. –

“giv[ing] the fullest weight to” that court’s own “pronouncements,” Runner v. N.Y.

Stock Exch., Inc., 568 F.3d 383, 386 (2d Cir.) (internal quotations omitted), certified 

question answered, 13 N.Y.3d 599 (2009), as well as “proper regard to the decisions 

of [New York’s] lower courts” and “the decisions of federal courts construing 

1 Along the way, the Third Department acknowledged that the First Department had recently 

found such language to unambiguously preclude coverage on facts similar to those at issue in Grande 

Stone Quarry. See 918 N.Y.S.2d at 240 (citing DMP Contracting Corp. v. Essex Ins. Co., 907 N.Y.S.2d 

487, 489–90 (1st Dep’t 2010)). Thus, even if Grande Stone Quarry and DMP Contracting were

directly on point here, the district court would have been free to “choose . . . which” of those “two 

conflicting decisions of different Appellate Divisions . . . is more in line with the decisions of the 

New York Court of Appeals.” United States v. Novsam Realty Corp., 125 F.2d 456, 457 (2d Cir. 

1942).
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[relevant New York] law,” Phansalkar v. Andersen Weinroth & Co., L.P., 344 F.3d 184, 

199 (2d Cir. 2003) (internal quotation marks omitted). Here, the record reflects 

that the district court carried out that task soundly and carefully. Indeed, for 

substantially the same reasons as stated in the district court’s well-reasoned 

decision, we conclude that under New York law, the Absolute Auto Exclusion 

unambiguously precludes coverage of the Insureds’ defense and indemnity in the 

Underlying Action. 

“[W]hen[] an insurer wishes to exclude certain coverage from its policy 

obligations, it must do so in clear and unmistakable language.” Seaboard Sur. Co. 

v. Gillette Co., 64 N.Y.2d 304, 311 (1984) (internal quotation marks omitted). Thus, 

“ambiguities in an insurance policy[’s] . . . exclusionary clause[s]” are “to be 

construed against the insurer.” Ace Wire & Cable Co. v. Aetna Cas. & Sur. Co., 60 

N.Y.2d 390, 398 (1983). However, “unambiguous provisions must be given their 

plain and ordinary meaning,” Sanabria v. Am. Home Assur. Co., 68 N.Y.2d 866, 868 

(1986), and “courts are not free to disregard the plain meaning of the policy 

language to find an ambiguity where none exists,” Conlon v. Allstate Vehicle & Prop. 

Ins. Co., 58 N.Y.S.3d 495, 498 (2d Dep’t 2017) (internal quotation marks omitted). 

As a corollary, New York courts have repeatedly and consistently ruled that 
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insurance contract language that has been replaced is of no effect. Courts must 

determine whether “the language of the disputed [replacing] provision itself is 

clear and unambiguous,” and if it is, “whether any ambiguity arises when it is read 

in conjunction with the rest of the policy.” Monteleone v. Crow Const. Co., 673 

N.Y.S.2d 408, 411 (1st Dep’t 1998); accord Budofsky v. Hartford Ins. Co., 556 N.Y.S.2d 

438, 441 (Sup. Ct. Suffolk Cnty. 1990); Rhinebeck Bicycle Shop, Inc. v. Sterling Ins. Co., 

546 N.Y.S.2d 499, 501–02 (3d Dep’t 1989); Ramirez v. U.S. Fid. & Guarantee Co., 519 

N.Y.S.2d 144, 146 (2d Dep’t 1987); Sayreville Seaport Assocs. Urb. Renewal, L.P. v. 

Indian Harbor Ins. Co., __ N.Y.S.3d __, 2023 WL 1455581, at *1 (1st Dep’t Feb. 2, 

2023); Total Concept Carpentry, Inc. v. Tower Ins. Co. of N.Y., 943 N.Y.S.2d 473, 474 

(1st Dep’t 2012); Handlebar Inc. v. Utica First Ins. Co., 735 N.Y.S.2d 249, 251 (3d Dep’t 

2002); see also Tozzi v. Long Island R.R. Co., 651 N.Y.S.2d 270, 276 (Sup. Ct. Nassau 

Cnty. 1996) (“[W]here [an] endorsement . . . has replaced [a standard

exclusion] . . . , the terms of [the replaced exclusion] . . . may not be considered in 

determining whether the subject policy is ambiguous.”) (internal quotation marks 

omitted), aff'd on other grounds, 668 N.Y.S.2d 102 (2d Dep’t 1998). 

This line of precedent squarely forecloses the Insureds’ argument that the 

Absolute Auto Exclusion can be rendered ambiguous by reference to the standard
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exclusion that it “delete[s]” and “replace[s].” J. App’x at 153. In other words, 

we do not assess the ambiguity of the Absolute Auto Exclusion by looking to the 

limiting language of the standard exclusion – “[t]his insurance does not apply to . 

. . [b]odily injury arising out of the . . . use . . . of any . . . auto . . . owned or operated 

by . . . any insured,” id. at 120, 122 (emphasis added) – and then asking whether the 

Absolute Auto Exclusion is adequately forceful or specific in its repudiation of that 

language. Instead, we must analyze the language of the Absolute Auto Exclusion

on its own terms, and ask whether its “plain and ordinary meaning,” Sanabria, 68 

N.Y.2d at 868, “clear[ly] and unmistakabl[y]” excludes liability coverage for 

injuries arising out of the use of an automobile owned and operated by someone 

other than an insured party, Seaboard Sur. Co., 64 N.Y.2d at 304 (citation omitted).

Like the district court below, we are persuaded by – and defer to – the 

reasoning of New York courts that have answered that question in the affirmative. 

For instance, the First Department has held that an exclusion of liability coverage 

for “bodily injury . . . arising out of . . . the ownership [or] use . . . of any auto”

unambiguously applies “whether or not it is the insured who owned [or] used . . .

the subject automobile,” reasoning that the plain meaning of its language “focuses 

on the connection between a vehicle and the injury, not between a vehicle and the 
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insured.” DMP Contracting Corp., 907 N.Y.S.2d at 489–90. Similarly, the Second 

Department has found “no ambiguity as to the plain and ordinary meaning of [an]

auto exclusion” that “stated that the insurer was not obligated to ‘pay for bodily 

injury, property damage, personal injury or advertising injury that arises out of 

the ownership, operation, [or] use . . . of an auto.’” Ruge v. Utica First Ins. Co., 819 

N.Y.S.2d 564, 565 (2d Dep’t 2006) (alteration omitted). Following those courts, we 

hold that under New York law, the Absolute Auto Exclusion’s disclaimer of

coverage for “[b]odily injur[ies] . . . arising out of” the “use . . . of any . . . auto,” J. 

App’x at 153 (internal quotation marks omitted), unambiguously precludes 

coverage for the Underlying Action. 

Indeed, we find this case to be even more straightforward than those 

decided by the First and Second Departments in DMP Contracting and Ruge. 

Here, after all, the Policy is explicit in clarifying that the Absolute Auto Exclusion 

“applies even if the claims against any insured allege negligence . . . in the 

supervision . . . or monitoring of others by that insured, if the occurrence which 

caused the bodily injury . . . involved the . . . use . . . of any . . . auto.” Id. at 153 

(internal quotation marks omitted). There can be no doubt that such language 

covers the Riders’ underlying claim that the Insureds “negligently . . . failed” to 
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“provide traffic control” for the “multiple thousands of motorcyclists” and 

“motorists traveling to and from . . . the entrance of the [Harley Rendezvous].” 

Id. at 189–90 ¶¶ 20, 22–23.

IV. CONCLUSION

For the foregoing reasons, we AFFIRM the judgment of the district court.