Key elements of bad faith litigation
Bad faith litigation becomes necessary when insurance companies for at-fault parties unreasonably deny, delay, or underpay a legitimate claim.
All insurance policies contain an implied duty of good faith and fair dealing. It means they’re obligated to act fairly, honestly, and in the best interests of their policyholders when handling claims.
Some of the ways insurance companies fall out of compliance include:
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Failure to conduct an adequate investigation:
Insurance companies are expected to conduct thorough investigations into claims. Failing to do so – or conducting a biased or incomplete investigation – can be interpreted as acting in bad faith.
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Unfair claims practices:
Any violations of state insurance regulations or unfair claims practices can be considered as acting in bad faith.
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Unreasonable denial or delay:
Insurance companies that unreasonably deny a valid claim, delay payment, or underpay are engaging in bad faith practices.
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Compensation for bad faith claims
Several factors determine how much compensation is granted in bad faith litigation cases. Specific circumstances of the case, damages suffered by the policyholder or injured party, and New Mexico insurance laws and regulations.
Some of the components that influence the determination of compensation include:
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Attorney’s fees and costs:
In many bad faith cases, the insurance company is required to cover the policyholder’s attorney’s fees and legal costs. Doing so ensures that policyholders have access to legal representation to pursue their claims.
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Damages suffered:
The primary factor in determining compensation in a bad faith claim is the actual damages suffered by the policyholder. Economic damages, such as the value of the original claim, medical expenses, lost income, and any other financial losses due to the insurer’s misconduct are included.
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Negotiation and settlement:
Some bad faith claims are resolved through negotiations between the injured party and the insurance company. The negotiated settlement amount can vary based on the strength of the case and the willingness of the insurer to resolve the dispute outside the courtroom.