First, there's a three-year statute of limitations for negligence in New York, so the action is timely.
Second, merely because the other vehicle had a stop sign does not mean its driver is 100% at fault for the accident. A stop sign imposes a duty on a driver to come to a complete stop at the intersection and use due diligence before proceeding, but if another vehicle is proceeding on the other roadway at an unsafe speed, or if it is night time and the other vehicle does not have its lights on, for example, it will be for a jury to determine the percentage of fault allocated to each of the vehicles. (I don't think your insurance companies settled the case, or you would not have been sued.)
Of course, when a vehicle with a stop sign is involved in an accident with another vehicle that does not have a stop sign, there is a strong chance the vehicle without the stop sign will win the case, so you're in good shape, but don't take anything for granted. The plaintiff probably has some good theory of liability, or his attorney likely would not have taken the case. Cooperate with your attorney and prepare well for your deposition, and you should do fine.
He should not win after admitting 100% liability. Your lawyer should try to stop it at the pleading stage under a theory of res judicata. There may also be a statute of limitations issue if he waited more than 2 years to sue.
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