Examples of Bad Faith Insurance Claims and How to Recognize Them

When an insurer drags its feet, denies a valid claim, or avoids communication, it doesn’t just delay compensation—it creates real financial strain. Insurance is supposed to offer peace of mind, not more problems. If you’ve paid your premiums and played by the rules, you deserve the same in return. Here, at VandenBout Law, we outline examples of bad faith insurance claims, how to spot them early, and what your options are if it’s happening to you here in New Mexico.

What Is a Bad Faith Insurance Claim?

Insurance companies are legally obligated to treat policyholders fairly, operating with honesty, transparency, and promptness when handling claims. A bad faith insurance claim arises when an insurer deliberately delays, denies, or underpays a valid claim without a sound reason or proper investigation. Bad faith actions distort the balance between the insurer and the insured, damaging the integrity of the entire process. This behavior isn’t just poor service—it undermines the core principle of trust embedded in the insurance contract. 

Bad Faith vs. Claim Denial

Not every denial of coverage amounts to bad faith. Insurance providers can lawfully reject claims if there’s a valid reason—such as exclusions outlined in the policy, a lapse in coverage, or a lack of sufficient supporting documentation. However, the line is crossed when an insurer knowingly ignores relevant evidence, fails to investigate the claim thoroughly, or distorts policy terms to justify a denial. These are not honest mistakes—they may signal deliberate misconduct. 

Your Rights as a Policyholder

As a policyholder in New Mexico, you’re entitled to clear communication, reasonable timelines, and a full investigation of your claim. Insurance companies must operate in good faith, keeping you informed and treating your claim with the seriousness it deserves. If your provider delays without cause, gives misleading explanations or avoids addressing key facts, they may violate your legal rights. 

Examples of Bad Faith Insurance Practices

Insurers may use a range of tactics—some subtle, others overt—to avoid paying what’s owed. Below are some of the most common examples of bad faith insurance claims, each representing a breakdown in fair dealing:

Denying Legitimate Claims

Wrongfully denying a valid claim is one of the clearest signs of bad faith. This typically involves:

• Refusing payment despite clear evidence the loss is covered.
• Overlooking or dismissing critical facts during the claim investigation.
• Using biased or manipulated expert assessments to justify rejection.

In each case, the insurer fails to uphold its duty to evaluate the claim objectively and within the bounds of the policy.

Delaying Payment Without Reason

Excessive delays in processing or paying claims can be just as harmful as outright denial. Policyholders should be alert to:

• Long periods without updates or explanation.
• Repeated requests for documents already submitted.
• Vague excuses, such as internal reviews or staffing issues, are used to stall action.

Under New Mexico law, unjustified delays can create grounds for legal action against the insurer, especially when they cause financial hardship.

Many clients also ask,what damages can be recovered in a bad faith case?, since delays often lead to financial and emotional strain that go beyond the claim itself.

Misleading Policyholders

Deception or lack of transparency during the claims process is another red flag. This might include:

• Misrepresenting what is or isn’t covered under the policy.
• Using overly complex or vague policy language to obscure terms.
• Withholding critical information about claim procedures or deadlines.

This kind of conduct violates the insurer’s obligation to deal fairly and can severely impact a policyholder’s ability to recover. 

How to Identify Bad Faith

Identifying insurance bad faith early can make a major difference in your ability to take corrective action and build a strong claim.

Key Warning Signs

Watch for the following signs that may indicate your insurer isn’t acting in good faith:

• Repeated delays with no valid explanation.
• Sudden or inconsistent communication—or total silence.
• Conflicting statements about what your policy covers.
• A denial without a written reason or clear justification.
• Adjusters ignoring important documentation or downplaying evidence.

These red flags often indicate an insurer’s intent to avoid liability rather than resolve your claim fairly.

If you’re based in the Albuquerque area and facing unfair delays or denials, working with an experienced Albuquerque Insurance Bad Faith Lawyer can make all the difference. A local attorney understands how New Mexico’s insurance laws apply, how insurers typically operate, and what evidence is needed to prove a bad faith case. Having the right legal guidance ensures your rights are protected from start to finish—especially when your insurer fails to uphold its duty of good faith.

When to Get Legal Help

If your insurer is delaying your claim without cause, offering inconsistent explanations, or denying coverage without clear justification, it’s time to involve a lawyer. Legal support can help you assess whether your case qualifies as bad faith, gather the right documentation, and pursue the compensation you’re entitled to under New Mexico law. A lawyer can also explain how to file a bad faith insurance claim and help you take the first steps with confidence. Many policyholders also wonder, Can You Sue Your Health Insurance Company? — and the answer is yes, especially when bad faith conduct clearly violates your rights under New Mexico law.

VandenBout Law Can Help

Schedule a Consultation

At VandenBout Law, we represent individuals across New Mexico facing wrongful delays, denials, or misrepresentation by insurance companies. We understand the financial stress of being mistreated and know how to hold insurers accountable. 

Let’s talk about your options if you’re seeing examples of bad faith insurance claims in your own experience. Call us today to schedule a consultation and start protecting your rights.

Lawrence VandenBout

Mr. VandenBout has successfully tried multiple cases, he understands that many times the most efficient and effective resolution to a legal dispute occurs outside the courtroom and through the process of mediation. He has been successful in negotiating many favorable settlements for his clients. Mr. VandenBout also utilizes his experience to counsel and assist clients in developing strategies for minimizing the risk of becoming involved in potential legal disputes in the future.

Years of experience: Over 11 years
Recognition: Rising Star 2021, 2022, 2023 & 2024.
Location: Denver, CO