New York Court of Appeals Ends Rental Car Insurance Mandate in 4-3 Ruling

The New York Court of Appeals ruled 4-3 on April 23, 2026 that the federal Graves Amendment overrides a 25-year-old state requirement forcing rental car companies to act as the primary insurer when a renter causes an accident. Drivers who rent from Hertz, Enterprise, Avis, or Budget in New York will look first to their own auto policy for liability coverage, not the rental counter.

The ruling in Second Child v. Edge Auto, Inc. (2026 NY Slip Op 02436) settles a question that has churned through New York's courts since Congress passed the Graves Amendment in 2005 to shield rental and leasing companies from vicarious liability. Judge Madeline Singas wrote the majority opinion, finding it would be an "absurd result" to require rental companies to insure against liability that 49 USC § 30106 already preempts.

What the Court Decided

Before April 23, New York Vehicle and Traffic Law § 370 forced rental companies to provide primary, non-contributory liability coverage up to the state's 25/50/10 limits when a renter caused an accident. The 2001 decision in ELRAC, Inc. v. Ward cemented that obligation for nearly 25 years. Goldberg Segalla attorneys called the prior interpretation the most plaintiff-friendly rental car rule in the country.

Judge Singas wrote that VTL § 370 worked "in tandem" with VTL § 388, the state's vicarious liability statute. Because the Graves Amendment preempted § 388 in 2005, requiring § 370 to cover the same liability would create a workaround Congress specifically blocked. The Appellate Division and trial court had already reached that result; the Court of Appeals affirmed.

Chief Judge Rowan D. Wilson, joined by Judges Shirley Troutman and Caitlin Halligan, dissented. Wilson argued VTL § 370 fits within the Graves Amendment's savings clause for state financial responsibility laws and warned the majority's reading will increase consumer costs and leave New Yorkers without remedies in rental crashes involving low-limit drivers.

What This Means for NY Drivers Renting a Car

If you carry New York's 25/50/10 minimum policy, your rental crash liability protection just shrunk to your personal policy limits. The state Department of Financial Services data shows roughly 14 million New York drivers carry minimum-limit policies, which cap bodily injury at $25,000 per person and property damage at $10,000 per accident. Slam into a 2024 BMW at a Manhattan intersection, and that $10,000 cap evaporates before the bumper repair invoice arrives.

Every New York auto policy already includes a Rental Vehicle Coverage Endorsement covering physical damage to rentals 30 days or less in the United States, Canada, and Puerto Rico. That endorsement only covers damage to the rental vehicle itself, not your liability to others. For a deeper breakdown of how rental car insurance interacts with personal policies, the dollar limits on a rental now follow your personal policy directly.

Coverage Option	Liability Limit	Cost	Best For
NY 25/50/10 minimum policy	$25K / $50K BI, $10K PD	Already paid	Almost no one after this ruling
Personal policy raised to 100/300/100	$100K / $300K BI, $100K PD	+$80 to $200/year	Frequent renters, daily drivers
Enterprise Supplemental Liability Protection	$300K combined single limit	$8 to $17/day	One-off rentals under 5 days
Hertz Supplemental Liability Insurance	Up to $1 million	$11 to $16/day	High-asset renters
Credit card primary coverage (Sapphire Reserve, Venture X)	$75K typical cap	Annual card fee	Rentals 31 days or less

Source: WalletHub rental car insurance study 2026, Enterprise and Hertz published rate sheets, Mastercard MasterRental Coverage benefits guide. Daily SLI prices vary by NY rental location and vehicle class.

How the Graves Amendment Reached This Point

Congress passed the Graves Amendment in 2005 to halt vicarious liability suits against rental and leasing companies in plaintiff-friendly states like New York, Florida, and Connecticut. The federal law preempts state rules that hold rental companies financially responsible for damage caused solely by a renter's negligence, with a savings clause that preserves state insurance and financial responsibility laws.

New York courts had ruled the savings clause kept VTL § 370's primary insurance mandate alive. Edge Auto Inc. challenged that interpretation after a 2019 incident in which Second Child rented a truck and one of its employees sideswiped another vehicle. The trial court sided with Edge Auto, the Appellate Division affirmed, and the Court of Appeals has now resolved the split.

The decision aligns New York with federal appellate rulings in the Second, Third, Fifth, and Eleventh Circuits. Bloomberg Law characterized the holding as the strongest endorsement of the Graves Amendment by any state high court. The Court of Appeals left undecided whether VTL § 370 might still require rental companies to provide secondary or excess coverage above the renter's personal limits, a question Avis, Enterprise, and Hertz lawyers will likely test in the next 18 months.

What You Should Do Before Your Next Rental

What's Next for New York Renters and Insurers

Insurance Journal and Bloomberg Law expect rental rates in New York to drop modestly as carriers no longer have to price in the primary insurance exposure that ELRAC v. Ward required. The cost shift lands on personal auto policies, where higher claim frequency from rental crashes will likely show up in 2026 and 2027 renewal pricing, layered on top of the rate pressure already documented in New York's failed auto insurance reform.

Hertz, Enterprise, and Avis are already preparing motions to dismiss pending § 370 secondary coverage claims, the open question Judge Singas declined to answer. State Senator Liz Krueger has indicated she may introduce legislation restoring the primary coverage mandate as a financial responsibility requirement, though such a bill faces an uphill path against the federal preemption analysis the Court of Appeals just adopted.

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