A New York law that rental car companies carry a specified minimum amount of insurance on rented vehicles has been struck down by the New York Court of Appeals. Auto Rental companies in New York are no longer required to provide even minimum insurance coverage on rented cars. They only need to provide minimum insurance for the rental company’s own negligence, which is normally not the cause of an auto accident. Usually, the auto accident is caused by the negligence of the driver. Accordingly, if someone rents a car without possessing their own auto policy and declines insurance, the rented vehicle will effectively be uninsured, and the rental company will not be liable for any damages.
This is the result of an April 23, 2026, ruling by the New York State Court of Appeals in the case of Second Child v Edge Auto Inc. Before the ruling, all vehicle rental companies were required to provide at least the minimum liability insurance on rentals. That meant that any car rented from the company would have liability insurance of up to $25,000 per person, and up to $50,000 per accident.
If the renter of a car owns their own car, their own car’s auto policy will normally also provide auto insurance for short term rentals. Some credit cards will also provide auto insurance when using the credit card to make the rental. If the renter is not covered by another source such as their own auto policy, or a credit card, they will need to make sure they buy the insurance offered by the rental car company, to be covered.
If the rental car company fails to check that the renter has their own insurance, and allows the renter to rent a vehicle without buying insurance, the rented vehicle will be on the road without insurance. Such lack of insurance will hurt both the renter of the car, and anyone potentially injured by the negligence of the renter/driver of the car.
Auto insurance provides payment for items such as medical bills and lost earnings to occupants of a vehicle who are injured as a result of the use of a vehicle through No Fault Insurance. No Fault Insurance benefits are also payable to pedestrians and bicyclists struck by a vehicle. Compensation for pain and suffering is available to persons injured due to the negligence of the driver through liability insurance. If cars are allowed to be rented without insurance it is possible that none of these insurance benefits will be available to pay for economic losses, or to compensate for pain and suffering.
The case was decided by a 4-3 majority. The dissenting opinion warns that this decision will result in “increase costs and could leave many New Yorkers without a remedy in the case of an accident involving a rental vehicle. If… [this case] now requires [only] that car rental companies obtain insurance for their own negligent acts, there will be no statutory backstop to prevent rental car companies from either renting to uninsured drivers or requiring each driver to obtain her own insurance policy as a condition of using a rental vehicle. In either case, it is New York consumers who will bear the financial burden of personal insurance policies and increased premiums across the board.”