In every contract, New Mexico recognizes the parties’ duty to act in ‘good faith’ toward one another. This is called the implied covenant of good faith and fair dealing in the legal field, and it prevents one party from undermining the contract’s benefits. The insurance business – whether auto, property, disability, or health – is contract based. The policyholder purchases coverage according to the terms of the agreed-upon contract, including the right to claim damages up to policy limits, and the insurer must provide these services.
Bad-faith is the broad term used to describe any conduct New Mexico courts have decided breaches the duty of good faith and fair dealing. It is a contract and not a personal injury claim, but it often goes hand-in-hand with personal injury law. As such, personal injury law firms may file bad-faith contract claims directly against a liable insurance company to obtain additional damages – even over the policy limit – for their clients. In some cases, a lawyer might even demand triple damages for your injuries.
Defining Insurance Bad-faith in New Mexico
Although numerous insurer actions might support a bad-faith claim, New Mexico generally defines insurance bad-faith as the insurance company’s ‘frivolous or unfounded refusal’ to pay an eligible claim. This means the insurance company has absolutely failed, either intentionally or recklessly, to act in the insured’s best interest. This includes refusing to fairly settle personal injury claims filed against the insured, as this exposes the policyholder to liability.
Put another way, if the insurance company just does not seem to care about your claim, you might have a case for bad-faith. Examples include the insurer not investigating the facts, not responding to phone calls or emails, making unjustified denials, or offering lowball settlements. The key element in New Mexico bad-faith cases is intent. Insurance mistakes, such as adjusters not understanding the law or disagreeing on policy terms, are not enough to support a bad-faith claim. Instead, a personal injury lawyer must show that the insurance company made a conscious choice not to act in good faith, generally to save time or money.
What Does New Mexico Consider Bad-faith?
Numerous legal cases have addressed the actions New Mexico courts consider insurance bad-faith. The following are the most common examples of when insurers don’t act in good faith.
Failure to Investigate
Busy adjusters may intentionally fail to adequately investigate your claims. This happens in personal injury cases when adjusters take the insured’s statement at face value without considering your testimony or the accident report. It might also occur if the insurance company does not put any effort into determining the truth, such as hiring an accident investigator or calling witnesses to obtain statements. Remember, the adjuster’s actions must be reckless or intentional, not simply negligent, to support bad-faith claims.
Unreasonable Delay
New Mexico requires insurers to investigate, respond to, and settle claims promptly; although, it does not set specific deadlines. Fair and prompt investigations might include obtaining evidence before it disappears, such as requesting video footage within 30 days or reviewing car accident claims within a few days to help policyholders obtain a rental car.
A New Mexico personal injury attorney will be familiar with the timeframes applicable to unreasonable delay claims based on local case law. If you filed a claim more than a month ago and have had no substantive communication with the insurance company, contact a bad-faith insurance lawyer immediately. You might also have an unreasonable delay claim if, after receiving a thorough settlement demand, the insurance company does not promptly review and, if fair, make a settlement offer.
Unjustified Claims Denial
Bad-faith often arises in cases where the insurance company reviews a claim, either from the policyholder or injured party and refuses to pay. To obtain damages for insurance bad-faith in New Mexico, legal counsel must show that the denial was unjustified under the law or contract terms. Examples of unjustified claims denials include incorrectly asserting the following:
- Missing documentation
- Late claims
- Policy exclusions (no coverage)
- No compensable injury
- No liability
The most common unjustified claims denial involves assertions that the insured was not liable for your injuries. This requires the insurance company to determine that its policyholder, such as a negligent driver, was 0 percent liable for the accident and thus owes the injured party no damages. Such blanket liability denials are subject to increased scrutiny. If you receive an insurance denial letter, you should always contact a bad-faith insurance lawyer in New Mexico immediately. You have the right to both challenge and appeal insurance denials, and your litigator might even take these bad-faith claims to court when suing the liable party for personal injury damages.
Lowball Settlements/Refusal to Pay Out
If a drunk driver sideswipes you on the Big I, causing a catastrophic traumatic brain injury, your initial emergency room and ambulance bills alone might total over $10,000. In New Mexico personal injury cases, claimants are entitled to demand the following damages from liable insurance companies, possibly including their own insurance company:
- Medical Expenses: This includes both past expenses, such as the ER bill, and future anticipated medical needs. Your attorney may demand damages for doctors’ bills and home nursing costs, rehabilitation and therapy sessions, medications and medical equipment, and even medical transportation and home modifications.
- Lost Income and Benefits: If your injuries resulted in lost income, including overtime earnings, commissions, bonuses, and lost business opportunities, you may demand the value of these financial losses. You might also claim damages for lost earning capacity, promotions, and workplace benefits such as paid healthcare.
- Pain and Suffering (Non-Economic Damages): Serious injuries such as brain trauma, burns, slipped discs, fractures, and paralysis often result in significant physical pain, emotional anguish, lost enjoyment of life, inconvenience, and frustration. You are entitled to demand financial compensation for these non-economic losses in New Mexico.
The insurance company must consider these damages and make a fair settlement offer. If the company accepts liability but offers you $5,000 to settle your brain injury claim, this might be considered bad-faith. Even if the liable driver was not 100 percent responsible for the crash, such claims can still support policy payout demands, as New Mexico only requires drivers to carry $25,000 to cover bodily injury liability claims. Refusing to pay out the policy when fair can also be considered insurance bad-faith in New Mexico.
Refusal to Defend
Policyholders, not injured third parties, pay for insurers to defend them against lawsuits. Even if the policyholder is liable for an accident, the insurance company must still defend his interests during settlement negotiations and court proceedings. If the insurance company refuses to defend the policyholder, including ineffective or extremely poor legal counsel, you might have a claim for insurance in bad-faith.
Refusing to Settle
In New Mexico, insurers have the legal duty to settle claims whenever practicable. This does not mean they have to pay out their policies, but they must reasonably consider the benefits of settlement and, if appropriate, make fair settlement offers. In most personal injury cases, an experienced New Mexico personal injury attorney will prepare a full settlement demand package for the liable insurance company. This package may include the following:
- Police or accident report
- Photographs
- Videos
- Medical records
- Lost income statements
- Expert reports describing your injuries and losses
- Witness statements
- Settlement demand
An insurance company’s failure to review and seriously consider this settlement demand may be bad-faith. Unreasonable delays in reviewing information, often to pressure the claimant into accepting a lower settlement, might also be bad-faith. Once receiving a fair settlement demand, the insurer must either pay the demanded amount (within policy limits), pay out the policy, or make a counteroffer. If the liable insurance company refuses to pay (or offers only a small settlement), it must justify this refusal. A simple letter stating that your claim is ‘denied’ might give rise to bad-faith litigation.
Who Can Sue Insurance Companies for Bad-faith?
New Mexico recognizes two types of bad-faith insurance claims: policyholder (first party) and claimant (third party).
First-Party (Policyholder) Actions
Direct lawsuits between insurance companies and policyholders, generally based on contract law, are called first-party actions. These arise if the insurance company frivolously or recklessly refuses to pay a compensable claim. This can involve a direct refusal to pay property damage claims after a fire or benefits to the insured through an underinsured/uninsured motorist policy.
A policyholder might also sue for bad-faith if the insurance company refuses to defend him or fairly settle a third-party liability claim. This is because failing to settle claims exposes the policyholder to potential litigation and liability. Insurance companies do not have the final word on the injured party’s rights in New Mexico. An attorney may sue the negligent policyholder directly if the insurance company refuses to fairly review or settle third-party claims. This prejudices the policyholder and may support first-party actions for insurance bad-faith.
Third-Party (Claimant) Actions
If bad-faith is clear, the policyholder may sign over his or her litigation rights to the injured party. Policyholders normally do this in exchange for an injured party’s agreement not to hold them directly liable for additional damages. In third-party actions, the injured claimant’s attorney sues the liable insurance company for one or more of the bad-faith claims mentioned above. This includes claiming bad-faith if the insurance company refuses to settle viable claims.
In some cases, recovering a jury verdict above policy limits might result in an additional award of damages for bad-faith. If the insurance company did not exercise fair and honest judgment during the claims process, you can have both personal injury and bad-faith insurance claims in New Mexico.
Demanding Damages for Bad-faith Insurance Practices
Bad-faith insurance claims are unique in New Mexico because they require the claimant to show the insurer intentionally or recklessly mishandled the case. This reckless disregard for the parties’ rights allows experienced bad-faith insurance lawyers to demand both fair compensatory (medical bills, lost income, and pain and suffering) and punitive damages from the insurance company.
Punitive damages, though not normally available in personal injury cases, are available in insurance bad-faith cases because they involve egregious misconduct. These damages punish the insurance company for its bad-faith and may be awarded above and beyond insurance policy limits. Additionally, your lawyer might request fees, court costs, and even triple damages if the insurance company violated state insurance laws.
New Mexico’s unfair insurance claims laws prohibit insurance companies from engaging in fraudulent or criminal conduct. During the initial bad-faith claims investigation, your personal injury lawyer might uncover evidence of widespread fraudulent insurance practices within the company. This might include employee memos directing adjusters to intentionally delay claims review, send out blanket denial letters to discourage claimants, or otherwise attempt to unfairly reduce financial liability.
Unlike traditional bad-faith claims, which allow claimants to recover damages for extremely careless conduct, obtaining triple damages under New Mexico law generally requires some level of criminal fraud.
Personal Injury Lawyers Handle Bad-faith Insurance Claims in New Mexico
If you suffered an injury in an accident, including a slip-and-fall or car crash, a personal injury law firm might handle both your personal injury claims and, if necessary, file bad-faith insurance litigation. Although these are contract-based lawsuits, they are linked to complicated liability determinations and injury settlement negotiations. A personal injury law firm is the best option for enforcing your rights under an insurance contract, especially if you’ve suffered an injury in an accident.
Personal injury firms understand the fair settlement value of your case and can immediately determine if you’ve received a lowball offer. They can also challenge investigation delays and prepare insurance settlement packages that, if not fairly reviewed, might give rise to bad-faith litigation. If necessary, legal counsel will bring joint litigation against negligent parties and reckless insurance companies, demanding both compensatory and punitive damages. If you’re frustrated with a liable insurance company in New Mexico, contact a local personal injury attorney immediately to discuss your right to file a bad-faith insurance claim.