Your Guide to Insurance Bad Faith in New Mexico: FAQs Answered

Insurance bad faith refers to a claim that an insured person may have against an insurance company for its bad acts. Under the law, insurance companies owe a duty of good faith and fair dealing to the people they insure. This means that the insurance company must not try to get out of its obligations to its policyholders unjustly. When an insurer intentionally denies, delays, or underpays valid claims without a reasonable basis, it is acting in bad faith.

For residents of New Mexico, understanding the nuances of insurance bad faith is crucial because it directly affects their ability to receive fair treatment and compensation under their insurance policies, including homeowners, auto, health, and life insurance policies.

What does bad faith mean in insurance?

Bad faith refers to unethical or dishonest practices by an insurer towards its policyholders, where the insurer fails to fulfill its contractual obligations or does not act in good faith to settle claims. This can include unjustly denying claims, failing to communicate adequately about claim decisions, or intentionally delaying claim processing without a valid reason. 

Essentially, it’s when an insurance company doesn’t live up to the promise of protection that it sold to the policyholder, acting instead in its own interest to the detriment of the insured.

What are three ways in which an insurer can be liable for bad faith?

• Unjust Claim Denial: An insurer may be liable for bad faith if it denies a claim without a reasonable basis for doing so. This means denying coverage or refusing to pay a claim when the facts and the policy terms would normally require payment.
• Unreasonable Delay in Claim Processing: Insurers are expected to handle claims promptly and efficiently. If an insurer drags its feet without good reason, causing unnecessary delay in acknowledging, processing, or settling a claim, it could be considered bad faith.
• Failure to Conduct a Proper Investigation: An insurer must conduct a thorough and fair investigation of each claim. Liability for bad faith may arise if the insurer either fails to investigate adequately or performs an investigation in a biased manner to justify denying a claim or reducing a payout.

What is evidence of bad faith?

Evidence of bad faith can vary widely but typically includes documentation and communication that demonstrate the insurer’s failure to act in good faith. This might include:

• Correspondence from the insurer that unjustly denies a claim or fails to provide a valid reason for claim denial or delay.
• Internal notes or memos from the insurer’s adjusters or investigators that suggest a lack of thorough investigation or a predetermined decision to deny a claim.
• Records of prolonged delays in claim processing without reasonable cause, including failure to respond to communications or to make a decision on a claim.
• Testimonies or affidavits from former employees or experts that indicate a pattern of bad faith practices within the insurance company.
• Comparison of the policy terms with the insurer’s reasons for claim denial or lowball offers, showing inconsistencies or misinterpretations by the insurer.

When do I need an attorney for insurance bad faith?

You might need an attorney for insurance bad faith in several situations, including:

• If your claim is unjustly denied: An attorney can help interpret your policy to determine if the denial was without basis and advise on the best course of action.
• If you experience unreasonable delays: An attorney can apply pressure on the insurer to expedite the process and ensure your claim is treated fairly.
• If the settlement offer is unreasonably low: An attorney skilled in negotiation can argue for a fair settlement based on the facts of your claim and the coverage you’re entitled to.
• If you’re unsure about your rights: An attorney can explain your legal rights and the insurer’s obligations under your policy and state laws.
• To file a lawsuit: If it becomes necessary to sue your insurance company for bad faith, having an experienced insurance bad faith attorney is essential to navigate the legal complexities and to advocate effectively on your behalf.
• Engaging an attorney experienced in insurance law and bad faith cases can provide the expertise needed to challenge insurance companies’ unfair practices and to secure the compensation and coverage policyholders are rightfully owed.

What Should New Mexico Residents Do About Insurance Bad Faith?

There are several steps New Mexico residents can take to ensure they are informed and properly wary of potential insurance bad faith: 

• Understand Your Policy: The first step is to thoroughly understand your insurance policy. Know what is covered and what your rights are under the policy. This knowledge will empower you to identify when the insurance company might be acting in bad faith.
• Document Everything: Keep detailed records of all communications with your insurance company, including dates, times, who you spoke with, and the content of the conversation. Also, keep all written communications and claim documents. This documentation can be vital in a bad faith claim.
• Attempt to Resolve the Dispute: Before taking legal action, attempt to resolve the dispute with your insurance company. Sometimes, miscommunications or misunderstandings are the root of the issue, and these can be resolved through dialogue.
• Consult with an Attorney: If your attempts at resolution are unsuccessful, consult with an attorney who specializes in insurance law and, specifically, bad faith claims. An experienced lawyer can provide you with a clear understanding of your legal rights and options.
• File a Complaint: You can also file a complaint with the New Mexico Office of the Superintendent of Insurance. This regulatory body oversees insurance companies operating in the state and can investigate complaints about insurance practices.
• Legal Action: If necessary, your attorney may advise you to file a lawsuit against the insurance company for bad faith. In a successful bad faith lawsuit, you may recover the original amount due under the policy, along with additional damages for the insurance company’s bad faith conduct.

For New Mexico residents, it’s important to remember that you have rights and protections under the law against insurance bad faith. By understanding these rights, documenting interactions with your insurance company, and seeking professional advice when necessary, you can ensure that you are treated fairly and receive the compensation you deserve under your insurance policy.

Finding an Insurance Bad Faith Attorney near Las Cruces, NM

If you think you’ve been a victim of insurance bad faith, getting in touch with an experienced insurance bad faith lawyer can help provide support during a confusing time. Reach out to The Law Offices of Kenneth G. Egan today to request a free consultation or give us a call at (575) 523-2222. We are located at 1111 Lohman Avenue, Las Cruces, NM, 88001, and are proud to service the surrounding areas, including Doña Ana, Santo Tomas, La Mesa, Fort Selden, Radium Springs, and beyond.