STATE FARM INSURANCE:

YOUR BAD FAITH NEIGHBOR:

 

IN THE SUPREME COURT OF THE STATE OF NEW MEXICO

Opinion Number: 2004-NMSC-004

Filing Date: January 20, 2004

Docket No. 27,928

IN RE: JOSEPH

EDWARD SLOAN, Debtor

JOSEPH EDWARD SLOAN and

BYRON Z. MOLDO, Chapter 7

Trustee,

     Plaintiffs-Appellants

     and Cross-Appellees,

v.

STATE FARM MUTUAL

AUTOMOBILE INSURANCE

COMPANY,

     Defendant-Appellee

     and Cross-Appellant.

 

CERTIFICATION FROM THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

....................

{21}     In such failure-to-settle claims, evidence of an insurer's negligence in researching a claim does not give rise to its own cause of action, but rather provides one possible means of demonstrating that an insurer acted in bad faith. As we said in Ambassador:

 

[W]hen failure to settle the claim stems from a failure to properly investigate the claim or to become familiar with the applicable law, etc., then this is negligence in defending the suit (a duty expressly imposed upon the insurer under the insurance contract) and is strong evidence of bad faith in failing to settle. Here, basic standards of competency can be imposed, and the insurer is charged with knowledge of the duty owed to its insured. In this sense, such negligence becomes an element tending to prove bad faith, but not a cause of action in and of itself.

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