The New York Court of Appeals and Legislature have made several changes that will have significant impact on how insurers handle auto claims going forward. Beginning with the statutory changes, the Governor successfully pushed for several changes she touted as needed reforms to combat insurance fraud and New York’s exceedingly high insurance rates.
These statutory reforms go into effect immediately and apply to cases filed on, or after, May 26, 2026.
The ‘Serious Injury’ Threshold
Many plaintiffs have leaned on the 90/180 to either establish the existence of a serious injury or at least avoid summary judgment. The threshold was vague, easy to manipulate, and focused on a timeframe that was likely years removed from the point in time the plaintiff was being deposed in a lawsuit — thereby mitigating a defendant’s ability to counter a claim under this category.
New York has eliminated this category outright. A ‘serious injury’ is now defined as:
a personal injury which results in death; dismemberment; significant disfigurement; a fracture; loss of a fetus; permanent loss of use of a body organ, member, function or system; permanent consequential limitation of use of a body organ or member; or significant limitation of use of a body function or system.
The loss of this category is significant for plaintiffs and obviously beneficial for defendants. Plaintiffs cannot now raise a question of fact as to sustaining a ‘serious injury’ by simply testifying their daily lives were impaired for the three months following an accident. This change raises the evidentiary bar facing plaintiffs going forward.
Capped Damages Under Specific Circumstances
Under Insurance Law §5104(d) non-economic loss is capped at $100,000 for specific at-fault claimants (except for death cases). The cap applies to drivers:
(1) operating an uninsured motor vehicle — except if a lapse in motor vehicle insurance coverage occurs for a period of time less than 30 days;
(2) operating a motor vehicle while impaired at the time of the accident and convicted of such; or
(3) operating a motor vehicle in the commission of a felony, or immediate flight therefrom, at the time of the accident and has been convicted of such felony.
This is certainly not a general cap on damages. The statute is narrow and specific. The cap only applies to non-economic damages. Further, to rely on the statute a defendant must establish certain conditions precedent, including the plaintiff being convicted of driving while impaired or in the commission of a felony. Absent these conditions, the cap is inapplicable.
Modified Comparative Fault
New York has long followed a “pure comparative fault” system, which allowed a plaintiff’s recovery to being reduced by their comparative fault up to 99%. As a result, plaintiffs with poor liability cases, but high value injuries, had an overt incentive to take matters to trial. Plaintiffs could risk the possibility of a jury finding them to be the primary cause of the accident, and take the resulting offset to the verdict, because the nature of their injuries made 49% of the verdict value worthwhile.
Now, “In any action to recover damages for personal injury subject to [the No-Fault Law], the culpable conduct attributable to the claimant shall bar recovery if the culpable conduct attributable to the claimant is greater than the culpable conduct of the person against whom recovery is sought or is greater than the combined culpable conduct of the persons against whom recovery is sought.”
If a jury assigns the plaintiff 51% of the fault to a plaintiff, the plaintiff is barred from recovery. This is a drastic change and will undoubtedly alter the calculation by plaintiff’s counsel as to whether a case should be filed, and if filed, its overall value as trial becomes a real prospect.
Order of Issues to be Tried
The comparative fault change coincides with clarification as to how auto claims are to be tried. Initially, the new statute codifies when interest begins to run. The statute states:
No liability for non-economic loss shall be fixed unless and until the trier of fact has determined the existence of a serious injury. In any action to recover non-economic loss pursuant to this article, the trier of fact shall not determine the question of whether an injury is a serious injury until the trier of fact has determined the party or parties at fault.
New York continues to have a generous 9% interest rate. Pursuant to the above, interest does not run until the plaintiff has established both fault and the existence of a serious injury. The new law limits the leverage that statutory interest can create by delaying the point at which “liability” for non-economic damages is determined. In cases where the plaintiff obtains a liability judgment years before an actual trial, interest would not begin to run until it is determined that a serious injury has been sustained.
The latter part of the above statute addresses trials and requires a jury to determine fault first and before considering whether a ‘serious injury’ exists. In practical effect, auto claims are statutorily bifurcated with a determination of fault first and in light of the changes to comparative negligence, trying fault first may result in the outright dismissal of the case before the jury hears any evidence as to a claimed injury.
Priority of Coverage – Rental Vehicles
The Court of Appeals recently issued its decision in Second Child v. Edge Auto, Inc., 2026 N.Y. Lexis 556 (2026), where the Court considered the priority of coverage between personal insurance and coverage on a rented vehicle. Historically, New York imposed a combined statutory framework that heavily impacted rental companies:
Vehicle and Traffic Law § 388 imposed vicarious liability on vehicle owners, including rental companies, for accidents caused by permissive drivers.
Vehicle and Traffic Law § 370 required rental companies to maintain insurance covering their vehicles, which courts interpreted as requiring primary coverage up to statutory minimum limits.
Under prior case law, these provisions worked together to require rental companies to act as the primary insurer for accidents involving their vehicles, at least up to minimum coverage thresholds. However, in 2005, Congress enacted the Graves Amendment, which prohibits states from imposing liability on rental car companies solely based on ownership of the vehicle, where the company itself was not negligent.
While this statute abrogated vicarious liability based on ownership of a vehicle, policies for rental vehicles remained primary in responding to tort claims and lawsuits. This, ultimately, created a key legal question: Can a state require rental companies to provide primary insurance coverage if federal law eliminates the underlying liability that coverage was intended to insure?
In resolving this question, the Court of Appeals held that Federal law preempts New York’s requirement that rental companies provide primary liability coverage to renters. While rental companies must still maintain minimum insurance coverage, such insurance coverage cannot be required to be the first layer of coverage in the event of an accident.
In other words, while rental companies must carry insurance on their vehicles, rental companies are no longer obligated to provide primary, first-dollar coverage for accidents caused by renters.
Going forward, where a carrier has issued an auto policy to an insured that is in an accident while driving a rental vehicle, that carrier should expect a tender from the rental car company requesting its coverage be primary, which would presumably include the obligation to provide a defense. Arguably, an insured’s personal or commercial policy will be first on the risk even if the insured is using a rented vehicle at the time of the loss.
Next Steps
Gerber Ciano Kelly Brady monitors legislative developments closely. We are prepared to advise our clients on how to position their litigation strategies, claims handling protocols, and coverage positions in light of any enacted reforms. We will provide further updates as the legislative session progresses.
For questions about how these proposals may affect your specific lines of business or pending matters, please contact your attorney at Gerber Ciano Kelly Brady or contact us today.
This client alert is for informational purposes only and does not constitute legal advice.
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