What Is The Time for Responding to a Defense Tender?
Insurers must act reasonably promptly upon communications with respect to claims, N.M. Stat. § 59A-16-20. There are no statutes, cases or regulations that further define “reasonable promptly.”
Insurers must affirm or deny coverage within a reasonable time after proof of loss. N.M. Stat. § 59A-16-20. There are no statutes, cases or regulations that further define “reasonable time.”
Does Reserving Rights Create a Conflict of Interest?
No cases found.
Does a Reservation of Rights Create Additional Duties?
No cases found.
What Must Be Done If A Conflict of Interest Exists?
When a conflict of interest between the insurer and insured arises, it can be handled by insisting the insured hire independent counsel, by the insurer hiring two counsel, one to represent it and one to represent the insured, by a declaratory relief action or by a reservation of rights agreement. American Employers Ins. Co. v. Crawford, 533 P.2d 1203, 1209 (N.M. 1975).
Who Is Responsible for Fees of Independent Counsel?
No cases found.
What Are Independent Counsel’s Obligations?
No cases found.
What Settlement Duties Exist?
No cases found.
What Actions May Result in a Claim for Bad Faith?
Tort: An insured may proceed on a cause of action for bad faith against an insurer if it is able to show an insurer’s frivolous or unfounded failure to pay a claim covered by the policy. Sloan v. State Farm Mut. Auto. Ins. Co., 85 P.3d 230, 236-237 (N.M. 2004).
“To be entitled to recover for bad-faith failure to settle, a plaintiff must show that the insurer’s refusal to settle was based on a dishonest judgment. By ‘dishonest judgment,’ we mean that an insurer has failed to honestly and fairly balance its own interests and the interests of the insured. An insurer cannot be partial to its own interests, but rather must give the interests of its insured at least the same consideration or greater.” Sloan v. State Farm Mut. Auto. Ins. Co., 85 P.3d 230, 237 (N.M. 2004).
However, an insured may not succeed on a claim of bad faith against an insurer unless the insurer had a contractual duty to pay under the policy. Charter Services, Inc. v. Principal Mutual Life Ins. Co., 868 P.2d 1307, 1313 (N.M. 1994).
Statutory: New Mexico recognizes a private cause of action by an insured against an insurer for bad faith claims handling. N. M. Stat. §59A-16-20, et seq.
Are Attorney’s Fees Recoverable in Insurer-Insured Dispute?
Attorneys’ fees may be awarded to the prevailing party pursuant to the Unfair Claims Practices Act if the party complaining of the violation of that article has brought an action that he knew to be groundless; or the party charged with the violation of that article has willfully engaged in the violation. N. M. Stat. § 59A-16-30.
Are Punitive Damages Recoverable in Insurer-Insured Dispute?
Damages may be trebled should an insurer be held to have violated the Unfair Claims Practices Act. N.M. Stat. § 57-12-10(B).
Punitive damages may also be awarded in common law bad faith claims if an insured proves the insurer’s failure to settle was based upon a dishonest and unfair balancing of interests. Sloan v. State Farm Mut. Auto. Ins. Co., 85 P.3d 230, 238 (N.M. 2004).
Alternative Coverage Options
New Mexico does not support the filing of declaratory judgment actions to determine insurance coverage as the issue is a factual one. Lopez v. New Mexico Public Schools Ins. Authority, 870 P.2d 745, 748 (N.M. 1994) (citation omitted). This “prevents multiple suits and avoids the expense to insured of defending a collateral action brought by the insurer for a declaration of the insurer’s obligation to defend under the policy.” Foundation Reserve Ins. Co. v. Mullenix, 642 P.2d 604, 605 (N.M. 1982).
Relevant Statutes
Declaratory Judgment – N.M. Stat. § 44-6-2
“In cases of actual controversy, district courts within their respective jurisdictions shall have power to declare rights, status and other legal relations whether or not further relief is or could be claimed. No action or proceeding shall be open to objection on the ground that a declaratory judgment or decree is prayed for. The declaration may be either affirmative or negative in form and effect and shall have to force and effect of a final judgment or decree.”
Unfair or deceptive consumer practices – N.M. Stat. § 57-12-1.
Unfair Claims Practices Act – N. M. Stat. §59A-16-20, et seq.