A Berkshire Hathaway Group Inc. unit does not have to defend or indemnify motorcycle rally organizers for an accident where a car hit two motorcycle riders under an “absolute” auto exclusion in their general commercial liability policy, a federal appeals court ruled Wednesday, in affirming a lower court.

During an annual motorcycle rally in Pattersonville, New York, in June 2019, two motorcycle riders were entering the premises of the Indian Lookout Country Club when an automobile’s driver who was attempting to enter the premises allegedly did not yield the right of way and turned into their direct path, causing them severe injuries, according to the ruling by the 2nd U.S. Circuit Court of Appeals in New York in Covington Specialty Insurance Co. v. Indian Lookout Country Club Inc., et al.

Covington is a unit of RSUI Indemnity Inc., which in turn is a Berkshire Hathaway unit.

Covington’s CGL policy included an “absolute auto exclusion” that excluded coverage for any occurrence involving an auto that caused bodily injury, even if claims alleged negligence or other wrongdoing in supervision by the insured.

The injured drivers filed personal injury actions against both the driver and the insureds in state court. Covington denied coverage, and filed suit in U.S. District Court in Syracuse, New York, seeking a declaration it need not indemnify the policyholders.

The insureds filed a countersuit seeking declarations Covington was obligated to defend and indemnify them in the underlying litigation.

The district court ruled in the insurers’ favor on the basis of the exclusion.

In affirming the lower court, a three-judge panel said although a New York appeals court ruling found ambiguity in a similarly worded exclusion provision in a different insurance policy, “countless other decisions by New York courts support the district court’s reading of the Absolute Auto Exclusion.”

Plaintiff attorney Carolyn P. George, of counsel with Cooper Erving & Savage LLP in Albany, New York, said in a statement the New York appeals court ruling the panel rejected had “the same operative language” as in this case.

“The claim clearly arises under the policy and the exclusion (placed some 30 pages after the boilerplate provisions of the policy that it attempts to modify) is ambiguous when read by a reasonable business person,” she said.

“This decision unfairly impacted a small local husband and wife business, who paid valuable premium dollars for coverage for their annual event.

“The carrier’s aggressive filing of this (declaratory judgment) action in a forum favorable to it deprived these insureds of the coverage they fully expected to have.”

The insurer’s attorneys did not respond to a request for comment.