Bad Faith Insurance FAQ’s

What is Insurance Bad Faith?

Insurance bad faith occurs when an insurance company violates its promises to its policyholders or individuals covered under the policy.

An insurance company issues an insurance policy in exchange for premiums paid by the policyholders. The policy is a legal promise to protect the policyholder and certain individuals, such as household members, from economic injury and harm. An insurance company owes a number of duties to its policyholders: a duty to provide coverage, a duty to comply with the terms of the policy, a duty to pay valid claims covered by the policy, and a duty of good faith and fair dealing. New Mexico law requires that insurance companies conduct timely and thorough investigations, treat policyholders fairly and honestly, handle claims efficiently, and provide full payment for injuries.

In order to protect their profits, insurance companies sometimes engage in deceptive practices, deliberately misinterpret their own policy language, fail to conduct a thorough and timely investigate, or unreasonably delay paying a valid claim, make arbitrary demands regarding proof of loss, and use abusive tactics. These actions breach the insurance company's duties of good faith and fair dealing, and violate New Mexico law. The policyholder and individuals who are covered under the policy can bring a lawsuit for insurance bad faith.

It is best to contact an attorney knowledgeable in insurance law to help you understand whether your situation is worthy of filing a lawsuit against your insurance company.

What Should I Do When My Insurance Company Denies or Delays Payment on My Claim?

Document everything the insurance company has done or failed to do. Then contact an attorney who is familiar with insurance law and insurance bad faith claims in the state where you reside. When you meet with the attorney, it is helpful to bring a copy of your insurance policy and all documents, photographs, etc. you have sent or received from your insurance company with you to the meeting with the attorney.

Who is Covered Under My Insurance Policy?

The answer depends on the type of insurance policy you have and the policy language. For auto insurance policies in New Mexico, the named insured and household members are usually covered under the policy. If you let someone drive your car, they are usually covered under your policy. If you are riding in a car, and the driver gets in an accident the driver's insurance policy may provide coverage and you may also be able to rely on the coverage in your own policy.