Impact of AVOID Act on New York Insurance Industry

The Avoiding Vexatious Overuse of Impleading to Delay Act (AVOID Act) has recently been enacted in New York, marking a pivotal shift in the legal framework for civil lawsuits. Signed by Governor Kathy Hochul on December 19, 2025, the legislation implements more rigorous guidelines on third-party actions within legal proceedings, targeting perceived inequities in the judicial process.

Under these regulations, defendants in civil cases have a 60-day period to consider adding new third parties to a lawsuit. If they opt to proceed, a third-party defendant must be included within 45 days, with an additional 30-day window for a potential third party. These stipulations require defendants, often businesses, insurers, and municipalities, to promptly assess and respond to litigation, affecting their underwriting and risk management strategies.

The insurance industry anticipates significant ramifications from the AVOID Act, including potential premium increases, particularly in auto and construction insurance sectors. Data from the Partnership for New York City reveals that New Yorkers already endure insurance premiums 15% above the national average. With New York's high jury awards and legal costs, the industry is cautious about the added litigation pressures impacting financial obligations.

Construction insurers are especially concerned due to New York's Scaffold Law, which imposes strict liability for job-site injuries, thus inflating project expenses and insurance costs. The AVOID Act could exacerbate these issues, influencing insurers to reevaluate their market presence in New York. The sector must navigate these complexities, reassessing strategies for regulatory compliance and risk management.