CSG Law Alert: “AVOID” Act Means Big Changes to How Sureties Litigate in New York State Courts
New York recently changed its laws regarding third-party practice in a way that will have a significant impact upon sureties, requiring that, in actions commenced after April 18, 2026, decisions about impleading indemnitors and other potentially liable parties must be made promptly. No longer can sureties delay a decision on impleading indemnitors in exchange for their cooperation, and no longer can parties wait to identify potentially liable third parties through discovery.
New York’s Avoiding Vexatious Overuse of Impleading to Delay (“AVOID”) Act aims to curtail delays in litigation by preventing defendants from commencing third-party actions well into the life of the first-party action. To accomplish this goal, the AVOID Act amends CPLR 1007 to include new, stringent deadlines upon the commencement of third-party actions. The Act took effect on April 18, 2026, and applies to all cases commenced from that date forward.
Prior to the AVOID Act, defendants could implead third parties into an existing case at any time. Allowing defendants to bring new parties into a case after significant discovery already had been conducted usually resulted in adverse consequences for someone. Many courts refused to sever belated third-party actions. The result was that the court either entered a new scheduling order extending the discovery period so that the new third-party defendant could conduct discovery, thereby delaying the plaintiff’s ability to get to trial, or refused to extend the discovery period, leaving the new third-party defendant with woefully inadequate time to conduct discovery.
The AVOID Act requires that a defendant file a third-party complaint within 90 days of service of its answer unless the court orders otherwise.1 In the absence of an order, a late-filed third-party action must either be severed or dismissed without prejudice.2 The third-party summons and complaint, along with all prior pleadings in the action, must be served upon the third-party defendant within 20 days of filing.3 A third-party action cannot be commenced after a Note of Issue has been filed absent a showing of either “good cause” or that the commencement is “in the interest of justice”.4 The Act also bars the consolidation of a new action against a severed third-party defendant with the (already existing) first-party action.5 The Act contains exceptions for a limited set of third-party claims against the plaintiff’s employer for common law indemnity and contribution, which are not relevant to sureties (such claims typically are asserted cases brought under the Labor Law’s strict liability statutes for injuries sustained on construction sites).6
The Act leaves several questions unanswered. For example, the Act does not provide a standard for allowing the commencement of a third-party action after 90 days, although it does provide the standard of “good cause or in the interest of justice” for allowing the commencement of a third-party action after a Note of Issue has been filed. Without legislative guidance, courts may treat the 90‑day deadline inconsistently, with some permitting late third‑party actions for reasons such as judicial economy, frustrating the Act’s purpose.
The Act does not appear to bar the consolidation of a separate action commenced well after the existing action except where that separate action followed the severance of an untimely third-party action asserting the same claims. Presumably, requests to consolidate such separate cases will be governed by the traditionally permissive standard favoring consolidation.7 The Act should have prevented consolidation of a later-commenced action that could have been brought as a third-party action in the pre-existing case irrespective of whether the separate action followed severance of a third-party action asserting the same claims. The Act also should have stated that this consolidation preclusion applies to untimely third-party actions that are dismissed without prejudice and then recommenced as a separate action – as written, the Act precludes consolidation of only a late third-party action that was severed. A defendant may be able to circumvent the Act by commencing a separate action against the party that would have been the third-party defendant and then seeking to consolidate that action with the pre-existing action unless the courts are vigilant in denying consolidation where consolidation would delay the pre-existing action in any meaningful manner.
The Act simply precludes “consolidation” of a new action against a severed third-party defendant. “Consolidation”, in New York practice, is a full merger of separate cases for all purposes.8 But the consolidation statute does not talk only of “consolidation”; it also allows a “joint trial” (where two separate actions are tried together) or any “other orders concerning proceedings therein as may tend to avoid unnecessary costs or delay.”9 Such orders can include, for example, “consolidation” for purposes of discovery only,10 which is not actual “consolidation”.11 The Act does not address whether courts can order joint trials or coordinated discovery involving a severed third‑party defendant. Courts may attempt to mitigate the inefficiencies created by the Act by ordering coordinated discovery or joint trials – measures that “avoid unnecessary costs or delay”. Whether such orders will be viewed as permissible workarounds remains to be seen.
Since sureties may be both third-party plaintiffs and third-party defendants, the AVOID Act will impact litigation involving sureties significantly. The Act will compel sureties (as third-party plaintiffs) to decide early whether to assert indemnification claims against their indemnitors in litigation where the plaintiff seeks to recover from a bond. The Act also will require that persons and entities who may be obligated to indemnify the surety (or the principal) for a loss (other than parties to an indemnity agreement) – and any applicable insurance coverage – be identified early. Impleading a new party based upon facts learned in discovery will no longer be possible. Failure to identify potentially liable parties early in a case may result in the surety having to satisfy a significant judgment while litigating separately to obtain a judgment over against a party that should bear the ultimate liability – with time increasing the risk that the liable party will not be able to satisfy the judgment that the surety eventually obtains. In appropriate circumstances, sureties may want to consider pre-answer motions to dismiss, which will afford additional time to make impleader decisions (since an answer will not be due until the motion is decided). Sureties also may want to consider seeking a joint trial of the pre-existing action and a case that it subsequently commences against a party that the surety later identifies as potentially liable.
As third-party defendants, sureties should not be subject to being brought into existing litigation belatedly, after extensive discovery already has been conducted. How a separate action against the surety proceeds (as a result of severance or otherwise) may depend upon the collateral estoppel and res judicata effect of determinations made in the pre-existing action, if the principal has been a defendant in that pre-existing action. In a new action against both the principal and the surety, both should be afforded a full opportunity to conduct discovery and otherwise defend the case irrespective of the posture of the pre-existing case.
With the AVOID Act going into effect several weeks ago, we have yet to see how significantly the Act will impact surety and construction litigation and how the courts will interpret uncertain provisions. What is clear is that sureties will need to make decisions about seeking indemnity promptly upon being sued, particularly in performance bond litigation on large projects, where numerous others may be responsible for the loss, and where the loss of the efficiency of third-party practice and the ability to obtain an immediate judgment over against a liable party may result in significant added exposures and litigation expenses.
For more information, please contact the authors of this alert or the CSG Law Surety & Fidelity Group.
1 CPLR 1007(b).
2 CPLR 1007(d).
3 CPLR 1007(a).
4 CPLR 1007(c).
5 CPLR 1007(f).
6 CPLR 1007(e). An “awareness” trigger – that the 90 days begins to run when the defendant first becomes aware that the third party may be liable – applies only to third-party claims for common law contribution or indemnity against the plaintiff’s employer. Commentaries stating that this trigger applies to all common law contribution and indemnity claims are premised upon an earlier version of the Act that since has been amended.
7 See, e.g., U.S. Bank Nat’l Ass’n v. Stuart, 249 N.Y.S.3d 596, 598 (2d Dep’t 2026) (“consolidation is favored by the courts in serving the interests of justice and judicial economy”).
8 See, e.g., Troutman Sanders, LLP v. Parker, 976 N.Y.S.2d 109, 111 (2d Dep’t 2013).
9 CPLR 602(a).
10 See, e.g., Plot Realty LLC v. DeSilva, 847 N.Y.S.2d 1, 2 (1st Dep’t 2007).
11 Troutman Sanders, 976 N.Y.S.2d at 111 (consolidating cases “for the purposes of joint trial and discovery” was not a “true consolidation”).