44TH LEGISLATURE - STATE OF NEW MEXICO - FIRST SESSION, 1999

RELATING TO INSURANCE; EXTENDING COVERAGE OF UNFAIR CLAIMS PRACTICES BY INSURANCE COMPANIES TO THIRD PARTY CLAIMANTS; INCREASING DAMAGES; PROVIDING FOR ATTORNEY FEES AND COSTS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. A new section of the New Mexico Insurance Code is enacted to read:

"[NEW MATERIAL] DEFINITIONS.--As used in Chapter 59A, Article 16 NMSA 1978:

A. "claim" means a right to payment arising out of and within coverage of a policy;

B. "claimant" means a person who asserts a claim as an insured or as a third party to a policy;

C. "policy" means an insurance policy, including contracts of insurance, indemnity, health care, suretyship and annuity, along with all attached clauses, riders, endorsements and papers; and

D. "contract of insurance" means a contract by which one party assumes a risk of loss or liability for another party pursuant to a plan for the distribution of the risk in exchange for valuable consideration."

Section 2. Section 59A-16-20 NMSA 1978 (being Laws 1984, Chapter 127, Section 286, as amended) is amended to read:

"59A-16-20. UNFAIR CLAIMS PRACTICES DEFINED AND PROHIBITED.--Any [and all] of the following practices with respect to claims, by an insurer or other person, knowingly committed or performed with such frequency as to indicate a general business practice, are defined as unfair and deceptive practices and are prohibited:

A. misrepresenting to [insureds] claimants pertinent facts or policy provisions relating to coverages at issue;

B. failing to acknowledge and act reasonably promptly upon communications with respect to claims [from insureds] arising under policies;

C. failing to adopt and implement reasonable standards for the prompt investigation and processing of [insureds'] claims arising under policies;

D. failing to affirm or deny coverage of claims [of insureds] within a reasonable time after proof of loss requirements under the policy have been completed and submitted by [the insured] a claimant;

E. not attempting in good faith to effectuate prompt, fair and equitable settlements of [an insured's] claims in which liability has become reasonably clear;

F. failing to settle all catastrophic claims within a ninety-day period after the assignment of a catastrophic claim number when a catastrophic loss has been declared;

G. compelling [insureds] claimants to institute litigation to recover amounts due under policy by offering substantially less than the amounts ultimately recovered in actions brought by such [insureds] claimants when such [insureds] claimants have made claims for amounts reasonably similar to amounts ultimately recovered;

H. attempting to settle a claim [by an insured] for less than the amount to which a reasonable person would have believed he was entitled by reference to written or printed advertising material accompanying or made part of an application;

I. attempting to settle claims on the basis of an application that was altered without notice to, or knowledge or consent of, the insured, his representative, agent or broker;

J. failing, after payment of a claim, to inform insureds or beneficiaries, upon request by them, of the coverage under which payment has been made;

K. making known to [insureds or] claimants a practice of insurer of appealing from arbitration awards in favor of [insureds or] claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration;

L. delaying the investigation or payment of claims by requiring [an insured] a claimant or [the] his physician [of either] to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information;

M. failing to settle [an insured's] claims promptly where liability has become apparent under one portion of the policy coverage in order to influence settlement under other portions of the policy coverage;

N. failing to promptly provide [an insured] a claimant a reasonable explanation of the basis relied on in the policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement; or

O. violating a provision of the Domestic Abuse Insurance Protection Act."

Section 3. Section 59A-16-30 NMSA 1978 (being Laws 1984, Chapter 127, Section 296.1, as amended) is amended to read:

"59A-l6-30. PRIVATE RIGHT OF ACTION.--Any person covered by Chapter 59A, Article l6 NMSA l978 who has suffered damages as a result of a violation of that article by an insurer or agent is granted a right to bring an action in district court to recover three times actual damages. [Costs shall be allowed to the prevailing party unless the court otherwise directs. The court may award attorneys' fees to the prevailing party if:

A. the party complaining of the violation of that article has brought an action that he knew to be groundless; or

B. the party charged with the violation of that article has willfully engaged in the violation.] The court shall award attorney fees and costs to the party complaining of an unfair claims practice if he prevails. The court shall award attorney fees and costs to the party charged with an unfair claims practice if it finds that the party complaining of such conduct brought an action that was groundless.

The relief provided in this section is in addition to remedies otherwise available against the same conduct under the common law or other statutes of this state; provided, however, that the Workers' Compensation Act and the New Mexico Occupational Disease Disablement Law provide exclusive remedies."

Section 4. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 1999.