New York Anti-Subrogation Rule: Triggers, Exceptions, and ERISA

New York’s anti-subrogation rule stops an insurance company from suing its own policyholder, or anyone else covered under the same policy, to recover money the insurer already paid out on a claim. The doctrine has been enforced by New York courts for decades, anchored in the Court of Appeals decisions in Pennsylvania General Insurance Co. v. Austin Powder Co. (1986) and North Star Reinsurance Corp. v. Continental Insurance Co. (1993), and reinforced by statute for personal injury settlements. The idea is simple: if you paid premiums for coverage, your insurer should not be able to hand you a check and then come back demanding it be repaid.

The Two Requirements That Trigger the Rule

The bar applies only when both conditions are met. The person or company the insurer wants to sue must actually be covered under the relevant policy, whether as a named insured, an additional insured, or someone the policy was written to protect. And the loss the insurer is trying to recover on must fall within the risks the policy covers. If either piece is missing, the protection dissolves and the insurer can pursue subrogation like it would against any unrelated third party.

The Court of Appeals put it plainly in North Star: an insurer “has no right of subrogation against its own insured for a claim arising from the very risk for which the insured was covered.” The Court also extended this to situations where two separate policies from the same carrier cover the same risk, treating them as “integrally related and indistinguishable from a single policy in any relevant way.”¹

Two concerns drive the rule. An insurer suing its own insured is effectively trying to reclaim the very coverage that insured paid for. And when an insurer defends someone while quietly building a subrogation case against that same person, the conflict of interest is corrosive. The rule resolves both problems at once.

Who Counts as Insured

Protection does not stop at the name on the declarations page. Anyone qualifying as an additional insured under the policy gets the same treatment. That principle came out of Austin Powder, where a lessor had been added as an additional insured on a lessee’s policy. When the insurer tried to subrogate against the lessor after paying a claim, the Court blocked it, reasoning that the insurer should have expected to pay losses involving the additional insured because the policy was written to cover them.²

Later cases pushed the logic further. In Jefferson Insurance Co. v. Travelers Indemnity Co., the Court of Appeals confirmed that permissive users of insured vehicles are protected too, even though they are not named on the policy. What matters is not whether a person’s name appears on the paperwork but whether the policy was intended to cover them for the loss in question.²

One boundary worth flagging. New York does not follow the “implied co-insured” doctrine used in some other states, where a party qualifies as an insured simply because they contributed to the premium (a tenant whose rent effectively funds the landlord’s insurance, for example). In New York, the policy language itself has to establish the coverage relationship. Paying for coverage indirectly is not enough.

Construction Contracts and Additional Insured Endorsements

Anyone working in New York construction runs into the anti-subrogation rule constantly. General contractors and property owners routinely require subcontractors to add them as additional insureds on commercial general liability policies. When a jobsite accident triggers a lawsuit, the subcontractor’s insurer pays out and often looks for someone to charge back. If the general contractor or owner is an additional insured under the same policy for the same type of loss, the rule blocks that recovery.

This is where a common misconception surfaces. Construction contracts almost always include indemnification clauses requiring the subcontractor to cover the general contractor’s liabilities. You might think the insurer could use that clause to push the loss back onto its own insured. It cannot. The anti-subrogation rule overrides contractual indemnity. Even where the insured has expressly agreed to indemnify another party, the insurer still cannot subrogate against its own additional insured for a covered risk.¹

Separately, General Obligations Law Section 5-322.1 voids any construction contract clause requiring one party to indemnify another for losses caused by that other party’s own negligence, though it preserves the validity of insurance contracts.³ So an indemnity clause may be void under 5-322.1 while the additional insured endorsement on the liability policy still functions, and the anti-subrogation rule then prevents the carrier from circling back.

GOB 5-335: The Statutory Bar for Personal Injury Settlements

New York has a statute that goes beyond the common law doctrine for personal injury cases. General Obligations Law Section 5-335 creates a conclusive presumption that any settlement for personal injury, medical malpractice, or wrongful death does not include compensation for expenses already paid by an insurer.⁴ Because the settlement is presumed to exclude those costs, the insurer has nothing to subrogate against.

The statute goes further. A person who enters into such a settlement cannot face a subrogation or reimbursement claim from an insurer, and the insurer has no lien against the settlement proceeds for expenses it already paid.⁴ For injury victims, that keeps the settlement check from being eroded by reimbursement demands.

The statute does not cover everything. Three categories are carved out:

Medicare and Medicaid keep their subrogation and reimbursement rights.
A workers’ compensation carrier’s lien on third-party recovery proceeds is unaffected.
Subrogation claims for additional first-party no-fault benefits under New York’s no-fault framework remain intact.⁴

When the Rule Does Not Apply

The limits of the doctrine matter as much as its reach. Three situations regularly break the protection.

Different Risks or a Loss Outside Coverage

If the policy does not actually cover the specific loss at issue, the rule is out. North Star made this explicit: where exclusions rendered the policy inapplicable to the loss, the bar did not apply.¹ Federal courts applying New York law have followed suit, holding that even when parties are technically insured by the same carrier, the rule does not block subrogation when they are insured for different risks than the one giving rise to the claim.

Damages Above Policy Limits

When a judgment or settlement exceeds the policy’s coverage limits, the anti-subrogation rule does not shield the insured for the excess. It protects only to the extent the policy provides coverage. In 237 West 123rd Street, LLC v. A. Aleem Construction, Inc. (2021), the court confirmed the rule “did not apply to any damages awarded against [the defendant] that exceeded the coverage of the [insurer’s] policy.” Everything above the ceiling stays on the insured.

Policy Exclusions

A specific exclusion in the policy for the type of loss that occurred can take the insurer off the hook to begin with. If there is no covered risk, there is no conflict of interest to prevent, and subrogation can proceed. This overlaps with the “different risks” point but comes up most often when an insured assumes something is covered and discovers a fine-print exclusion says otherwise.

Waivers of Subrogation Are a Separate Tool

Parties can also eliminate subrogation rights by contract, independent of the anti-subrogation rule. Waivers of subrogation appear in commercial leases, construction contracts, and service agreements, and they work by each party directing its own insurer not to pursue the other for covered losses.

New York courts generally enforce these clauses under freedom of contract principles. A waiver of subrogation does not exempt a party from liability; it channels the loss to insurance for everyone involved.

On the insurance side, these arrangements usually require a specific endorsement. The standard form used with commercial general liability policies (CG 24 04) modifies the policy’s transfer-of-rights condition and only activates when the insured agreed in writing to waive subrogation before the loss. Sign a contract with a subrogation waiver but never get the endorsement added, and the waiver may not bind your insurer. Getting the endorsement in place before work starts is the step most often skipped and the one that matters most.

ERISA Preemption Can Wipe Out State Protection

Both the anti-subrogation rule and GOB 5-335 come from New York law. Federal law can override them. If you receive health benefits through an employer-sponsored plan that is self-funded rather than purchased from an insurance company, ERISA preemption supersedes New York’s protections.⁵

The mechanics: ERISA preempts state laws that “relate to” employee benefit plans. A savings clause preserves state insurance regulation. A deemer clause then says self-funded plans cannot be treated as insurance companies for state insurance law purposes.⁵ The practical result is a split. A fully insured group health plan purchased from a traditional carrier is subject to New York’s anti-subrogation restrictions. A self-funded plan administered by the employer is not, and it can enforce subrogation and reimbursement provisions in its plan documents regardless of what New York law says.

This distinction blindsides people. You settle a personal injury claim expecting GOB 5-335 to keep your health insurer out of the recovery, and then learn your employer self-funds the health plan and the statute does not apply. Confirming whether the plan is fully insured or self-funded is a necessary first step before relying on any state-level protection.

Workers’ Compensation Sits in Its Own Lane

Workers’ compensation subrogation follows a separate track. New York Workers’ Compensation Law Section 29 gives a workers’ comp carrier, employer, or the State Insurance Fund a lien on any recovery the injured worker obtains from a third party who caused the injury.⁶ The worker does not have to pick between comp benefits and a third-party lawsuit. They can pursue both, and the carrier gets repaid from the lawsuit proceeds after the worker’s reasonable legal expenses are deducted.

If the worker misses the deadline to sue, the right to sue the third party is automatically assigned to the workers’ comp carrier, which can then bring the claim directly.⁶ The common law anti-subrogation rule does not block these actions because the carrier is going after a third party, not its own insured. And GOB 5-335 expressly exempts workers’ compensation subrogation from its settlement protections.⁴

The lien equals the total compensation awarded plus medical expenses the carrier paid or expects to pay. If the third-party recovery exceeds that amount after legal fees, the worker keeps the surplus. If it falls short, the carrier contributes the difference between the recovery and the benefits owed under the comp statute.⁶

1
Cornell Law Institute. North Star Reinsurance Corporation v Continental Insurance Company
2
Cornell Law Institute. Jefferson Insurance Co v Travelers Indemnity
3
New York State Senate. New York General Obligations Law GOB 5-322.1 – Agreements Exempting Owners and Contractors From Liability for Negligence
4
New York State Senate. New York General Obligations Law GOB 5-335 – Limitation of Reimbursement and Subrogation Claims in Personal Injury and Wrongful Death Actions
5
Office of the Law Revision Counsel. 29 USC 1144 – Other Laws
6
New York State Senate. New York Workers Compensation Law Section 29 – Remedies of Employees and Subrogation