Insurance Bad Faith FAQs
Answers to common questions about insurance bad faith. What your insurer is allowed to do — and what crosses the line — depends heavily on your state, so the answers below link through to the law that applies where you are. This is general information, not legal advice.
Can I sue my own insurance company?
Yes. Every state we serve recognizes a claim against your own insurer for handling a claim unreasonably. New Mexico goes further than California and Arizona by also allowing a claim under the insurance statute itself, which carries attorney fees where the violation was willful.
Is a denied claim automatically bad faith?
No — and this is the most common misunderstanding. Insurers are allowed to deny claims they have properly investigated and genuinely believe are not covered. Bad faith is about whether the denial was unreasonable and whether the investigation was real, not about whether you disagree with the outcome.
What can I recover beyond the policy benefits?
Potentially the losses the denial itself caused, emotional distress, attorney fees, and punitive damages where the conduct was serious enough. The mechanisms differ by state, and the differences are substantial.
How long do I have to sue my insurer?
There is no single answer, because a bad-faith case usually contains more than one claim and they do not share a deadline. Treat the earliest plausible date as the real one and get your specific facts reviewed early.
My insurer keeps delaying. Is that bad faith?
It can be. Unreasonable delay is recognized as a form of bad faith in all three states, and a documented timeline of your calls and correspondence is usually what proves it.
What does it cost to bring a bad faith case?
Nothing up front. These matters are handled on a contingency basis for qualifying cases, and the initial review is free and confidential.
New Mexico law — what people ask
Can I sue my insurance company under a New Mexico statute?
Yes — and this is the biggest legal difference between New Mexico and its neighbors. New Mexico grants policyholders a private right of action to enforce the state’s unfair claims practices provisions, with actual damages, costs to the prevailing party, and attorney fees where the insurer’s violation was willful. California and Arizona allow no such claim.
Should I bring a common-law claim or the statutory one?
Often both. New Mexico allows a common-law bad-faith claim alongside the statutory one, and they have different elements and different remedies. Pleading them together is common practice here precisely because they fail in different places.
Can I sue the other side’s insurance company in New Mexico?
Sometimes — and this is another point where New Mexico stands apart. A third-party claimant who is an intended beneficiary of mandatory insurance has a statutory claim against the insurer, though only after the insured’s fault and your damages have been determined in court. California and Arizona bar the direct route entirely.
What does New Mexico require me to prove?
At common law, that the refusal to pay was frivolous or unfounded, or rested on a dishonest judgment that failed to give your interests at least equal consideration. On the statutory route the question is narrower and more concrete: whether the insurer engaged in conduct the statute prohibits.
Are punitive damages realistic in a New Mexico bad-faith case?
More so than in many states. Punitive damages are available for reckless disregard, oppression, or malice, juries here are instructed on them in bad-faith cases as a matter of course rather than exceptionally, and there is no statutory cap in a private bad-faith action.
When does the clock start in New Mexico?
Generally at the insurer’s denial rather than at the underlying loss, which is not what most people assume and can mean more time than expected. The period itself depends on how the claim is framed, since New Mexico offers more than one route.