New Mexico, like all states, requires that drivers carry auto insurance. But a policy’s purpose is much more than just keeping a driver compliant with the law. The whole point of paying insurance premiums is to have financial protection if the car is stolen, damaged, or if its driver or passengers are hurt in an accident. 

While insurance companies might be slow and difficult to deal with, in most cases, claimants can eventually receive compensation for their damaged property and injuries. Unfortunately, some insurance companies act in bad faith, using various techniques to avoid paying legitimate claims that they owe. 

These unfair insurance practices are frustrating and financially draining. And while they aren’t necessarily illegal, they are highly unethical. Suing an insurance company for bad faith may be the only way to get what is rightfully owed. When someone is experiencing insurance delay tactics or suspects that policy terms aren’t being followed, they should consult an attorney to investigate. 

What is Insurance Bad Faith?

All contracts, including those between an insurer and an insured driver, have what is known as an Implied Covenant of Good Faith and Fair Dealing. This means that both parties agree to act in good faith; in other words, they promise to uphold their part of the deal in a fair and honest manner. On the flipside, bad faith is the wrongful denial of a valid claim. In New Mexico, victims must show that the company’s actions were intentional. 

Bad faith may include the following unfair insurance practices:

• Lack of communication. Ignoring or failing to respond to questions and requests, for example.
• Stalling techniques, such as continually requesting additional paperwork, repeatedly passing a claimant’s case from one person to another, claiming that forms or evidence were not received, etc. Companies may also use confusing language to obstruct a case’s progress. 
• Insurance delay tactics. New Mexico law does not provide a specific deadline for responding to claims; only that the timeframe must be “reasonable.” If a resolution takes an unreasonably long time, the insurance company could be acting in bad faith. 
• Misrepresenting or misinterpreting policy terms. In an insurance policy, the implied good-faith covenant allows coverage for reasonable circumstances without having to spell out every possible scenario. For example, an auto insurer can’t deny coverage for a crash with a farm vehicle, just because farm vehicles are not specifically mentioned in the policy.
• Failure to investigate. Insurance companies must do their due diligence to ensure a claim is legitimate. It is bad faith if they skip interviews with witnesses, fail to request video evidence before it is erased, or ignore medical documents that provide proof of injuries.
• Denial without justification. A clear explanation should come with every claim denial. 
• Offering an inadequate settlement. While low settlement offers are common, they must be reasonable, especially when backed up by proof of injury and its cause. For example, suggesting compensation of $5000 for a car crash that resulted in an amputation or traumatic brain injury would be unacceptable and a red flag for bad faith.
• Harassment or coercion. Policyholders and accident victims should never feel pressured to accept an offer or drop a claim. 

First-Party and Third-Party Insurance Bad Faith Claims

When it comes to personal injury accidents, there may be first-party or third-party insurance bad faith. First-party refers to the policyholder. A third-party is anyone else who may rely on the policyholder’s insurance company for compensation. 

For example, say a customer slips and falls and breaks their leg at a store. They file a claim with the store’s insurance company for the cost of their immediate medical bills and physical therapy to regain their strength. 

Scenario A: The insurance company does not review the surveillance footage of the fall. They also tell the victim their claim is invalid, but don’t explain why. This victim could file a third-party bad faith claim. 

Scenario B: The circumstances are the same as in Scenario A. By not honoring the victim’s claim, the insurance company is in breach of its agreement to protect the policyholder: the store owner, who is now exposed to the threat of personal liability and litigation. This is considered a refusal to defend the insured and could be grounds for a first-party bad faith claim.

Legitimate Claims Denial vs. Unfair Insurance Practices

It’s important to remember that not every insurance claim will result in a payout. There are legitimate reasons for denials. But if someone is injured due to another’s negligence, they deserve compensation from the at-fault person’s insurance company. If the company uses unfair practices, those harmed are entitled to bad-faith damages too. 

The burden of proof for both personal injury compensation and insurance bad faith is on the person making the claim. They must be able to show that the company engaged in unfair insurance practices, rather than the routine and thorough process of investigating and finding that a claim has no merit.

In New Mexico, there is the added burden of proving that the bad faith actions were intentional and not due to a mistake or clerical error. 

Legal Rights and Remedies for Policyholders

Personal injury attorneys have much better luck than individuals in dealing directly with insurance companies. After an accident, a lawyer can collect evidence and craft a persuasive demand letter, allowing the victim to concentrate on recovering. 

If the claim is denied, the attorney can follow this path to help clients pursue what they are owed:

1. File an appeal. 
2. File a formal complaint with the insurance company if the claim is still denied and they suspect bad faith.
3. File a complaint with the New Mexico Office of Superintendent of Insurance (OSI) if the company still will not resolve the issue. The OSI will determine if the company has violated insurance regulations and enforce compliance. 

In addition, the attorney can file a lawsuit to collect whatever compensation is rightfully due. They can also seek additional damages from the insurance company for any harm done by delaying the claim. For example, if a victim experiences delayed treatment or medical setbacks because of unfair insurance practices, they may collect money for direct expenses as well as pain and suffering.

What You Can Do and When to Contact an Attorney

Consulting with an attorney immediately after a personal injury accident ensures that an experienced professional is on your side. A lawyer will know how to gather proof and build a valid case for compensation. They will also know how to spot insurance bad faith if it occurs. 

Victims can protect themselves by keeping a record of every interaction with the insurance company. This will provide valuable information about the company’s processes and whether they are meeting industry standards of fairness and good faith.

If the case is not resolved, attorneys will gather more evidence during the discovery phase of the lawsuit. This might include internal company documents, training materials, and guidelines for handling claims. This information could help a bad-faith case by uncovering intentional fraud or unfair insurance practices. For example, offering incentives to employees to make quick settlements for low payouts.

Many insurance companies will choose to settle rather than fight a convincing bad-faith lawsuit to protect their reputation. It is hard enough to deal with personal injuries after an accident; struggling to get satisfaction from an insurance company that’s acting in bad faith can make matters even worse. Contact Kane Personal Injury. We will help you navigate the insurance industry and negotiate a fair settlement. And if bad faith exists, we’re ready to fight for you on that front too.