Should I File a Lawsuit if the Insurance Company Rejected My Valid Claim?

Posted by Jared Pehrson | Jan 09, 2023

Life is full of uncertainty, and an accident can happen in a second. People purchase insurance policies to protect them and provide financial support in the event of a loss. For example, if you are injured by a negligent driver in either Arizona or New Mexico and are hurt, you can file a claim against the careless motorist to recover compensation for your medical expenses, lost income, pain and suffering, and more.

Ideally, insurance companies would pay out fair settlements that would fully cover the cost of losses. Unfortunately, this does not always happen. Insurance companies are big businesses, and they prioritize their profits over paying out fair settlements. 

If an insurance company has rejected your valid claim, you can file a lawsuit against them. Taking this type of legal action is not easy, though. An Arizona bad-faith lawyer can help you through it and ensure you receive the full compensation that is justly yours.

What are Bad Faith Laws?

Arizona and New Mexico both follow the Unfair Claim Settlement Practices Act. New Mexico has adopted the federal law, while Arizona has its own state law that largely mirrors the federal legislation. 

Under both sets of laws, insurance companies are required to act in good faith by responding promptly to insurance claims, conducting an investigation in a timely manner, and providing notice of either a denial or approval of a claim in a reasonable amount of time.

Both sets of laws also outline specific actions insurance companies are prohibited from taking. These include:

  • Misrepresenting material facts or policy provisions to claimants,
  • Failing to act in a reasonable timeframe or promptly acknowledge a claim once one has been filed,
  • Failing to implement and enforce reasonable standards for a quick investigation and processing of a claim arising under a policy,
  • Failing to approve or deny coverage of a claim promptly after the claimant has completed the proof of loss requirements,
  • Acting in bad faith by failing to provide a prompt, fair, and equitable settlement of a claim when liability has been made reasonably clear,
  • Encouraging claimants to pursue litigation by offering settlement amounts that are vastly lower than what is deserved,
  • Trying to settle a claim for a lower amount than a reasonable person would expect due to a reference or written printed advertising material,
  • Failing to provide information about the coverage under which coverage has been provided, once claimants request such information after payment has been made,
  • Notifying claimants that they appeal arbitration awards or verdicts in an attempt to persuade a claimant to accept a lower settlement,
  • Delaying investigation or claim payments by requiring a claimant to submit a preliminary claim report after they have already met the proof of loss requirement, as both contain essentially the same information, and
  • Filling to provide a claimant a prompt explanation of a denial or an offer for a compromise settlement.

The above are just a few actions insurance companies are prohibited from taking, and any one of them could form the basis for a bad-faith lawsuit. A bad faith lawyer in Arizona or New Mexico can advise on whether an insurer did not act in good faith and help you through the process.

The Statute of Limitations on Bad Faith Lawsuits

Like all lawsuits, those involving bad faith acts by insurance companies are governed by a time limit, known as the statute of limitations. In Arizona, you will have only two years to file a bad-faith lawsuit. In New Mexico, that time limit is extended to four years. In both states, the statute of limitations starts when the insurance company acts in bad faith.

It is vital that you file a lawsuit before the statute of limitations expires. If you do not file within an appropriate time, you will lose your right to claim any damages from the insurance company at all, as the courts will likely dismiss your case.

Damages Available in a Bad Faith Lawsuit

Like any lawsuit, you can recover financial compensation for any loss you experienced as a result of the insurer acting in bad faith. Some of the most common damages available in these lawsuits include:

  • The amount owed up to the limits of the insurance policy: If an insurance company has acted in bad faith, you have the right to claim the full coverage you deserve up to the limits of the insurance policy. For example, in Arizona, motorists are required to purchase auto insurance minimums of $25,000 in bodily injury liability and $50,000 for an accident as a whole. If you were the only person injured in a car crash and you incurred $30,000 in damages, you can recover $25,000, as that is typically the policy limit most drivers purchase.
  • Emotional distress: If you suffered emotional distress, anxiety, or embarrassment as a result of the insurance company's bad faith actions, you can pursue these damages in your lawsuit.
  • Attorney fees: Many people are reluctant to file a lawsuit because they do not want to pay the legal fees associated with one. However, you can ask the courts to force the insurer to compensate you for your legal fees, so any damages you are awarded are entirely yours.
  • Punitive damages: Punitive damages are not commonly awarded, but in some cases, they are available. You can claim punitive damages if you can show that the insurance company had the intention to injure you, they engaged in conduct they should have known would injure you, or the conduct was so shocking it could be assumed the insurer had the intention of injuring you.

A bad-faith lawyer in Arizona and New Mexico can review your case and provide an accurate value of the damages you deserve.

Our Bad-Faith Lawyers in New Mexico and Arizona Can Help with Your Lawsuit

If an insurance company has treated you unfairly, our bad-faith lawyers in Arizona and New Mexico can provide the sound legal advice you need. At Impact Legal, our attorneys have the necessary experience to go up against the big insurance companies. We can put our experience to work for you, too. Call us now at 602-844-5582 or reach out to us online to schedule a consultation.

About the Author

Jared Pehrson

Jared is a lifetime boater that has spent countless hours boating all over the left coast. His favorite lake is Lake Powell. Lake Powell reminds him of years past when he starting boating with his late grandfather. 

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