Insurance Bad Faith

Insurance companies exist to help their customers in time of need. They are bound by contract. In addition, they are bound by statute to do just that. Unfortunately, insurance companies often take advantage policy-holders. They may prey on the ignorance of their insured. Absent ignorance, they may simply exert brute force in the denial of legally owing coverage. Most policy-holders and many legal professionals do not understand the rights and obligations of insurers and their clients.

In addition to claims against the insured’s own insurance provider, a injured party may have a claim against the insurance company of the person or business that caused the injury. In New Mexico, the law now allows for third party lawsuits in these situations due to a growing level of wrongful denial of claims in the face of clear liability.

There are numerous insurance practices that may constitute bad faith entitling the insured to substantial contractual, statutory and punitive damages. An insurance company may be liable for its failure to promptly, properly, thoroughly and reasonably investigate a claim as to liability and damages. Once an investigation is completed and coverage indicated, an insurance company will be liable for a wrongful denial of benefits. Insurance companies are prohibited from requiring an insured to pursue a claim against any other party before offering settlement where coverage is indicated. Neither may an insurer delay coverage in anticipation of settlement with a third-party insurer.

An insurance company may engage in actual deception of the insured through an intentional or reckless misconstruction of file documents or policy provisions. Deception may also result from intentional non-disclosure of important information, or the failure to inform an insured of additional benefits due under the policy. More passive deception may result from unreasonably burdensome documentation demands not required by the facts or the policy.

There are many other practices that may result in a finding of bad faith practices. Insurance companies are very strictly regulated to insure the fair treatment of policy-holders or third party beneficiaries of the coverage. Unfortunately, despite the regulations and their clear statutory duties, many insurance companies play the game of numbers realizing that most aggrieved parties will walk away with their losses rather than fight the insurance company. As a result, these illegal practices continue daily. It is important to assert your rights in these cases to not only protect yourself but to deter these practices in the future. The law allows just that through the award of compensatory damages as well as substantial punitive damages in egregious cases.

What to Do in Case of a Wrongful Denial of Insurance Coverage:

  • Put The Insurance Company On Notice Of Your Claim
  • Obtain A Copy Of Your Insurance Policy
  • Collect All Documentation Of Injuries Or Damages
  • Collect All Documentation Or Other Proof Of Liability
  • Document Carefully Any Communication, Written, Telephonic Or Personal, With Representatives Of The Insurance Company
  • Contact An Attorney To Understand Your Rights And Any Applicable Time Limits


Please remember that there are strict time limits on personal injury claims. If you miss these time limits, your claim will be barred forever. Most personal injury claims in New Mexico have a 3 year statute of limitations period. However, the time period for taking action may be as little as 90 days if a governmental entity is involved. It is critical that you speak with a lawyer immediately after an accident so you will know any time limits that apply to your claim.

(505) 242-5958