New Mexico remains firmly in the column of states where the tort of bad faith may be “untethered” from coverage.
Haygood was shot by Cordova in, or near, Cordova’s parked car. The car was uninsured and Haywood presented an uninsured motorist claim to his insurer, USAA. The adjuster recommended paying the claim as related to the use of the car, if Haygood was shot while in the car.
In-house counsel recommended obtaining more information about where Haygood was when he was shot but thought the claim likely wasn’t covered. USAA continued investigating but, without uncovering additional evidence about exactly where the shooting occurred, denied the claim.
Haygood sued USAA for breach of contract, bad faith and violation of New Mexico’s Unfair Insurance Claims Practices Act. The trial court found that the shooting was an intentional act that broke any causation chain that might otherwise exist between the use of the car and Haygood’s injuries. It granted summary judgment in favor of USAA on breach of contract and, since there was no coverage, the trial court posited that there was no bad faith.
Haygood argued to the Court of Appeals that, notwithstanding Cordova’s intentional assault, there was coverage under New Mexico’s three-part “Normal Use” test. He asserted that two “uses” of the car by Cordova (to store drugs and to shield his assault of Haygood from passersby) supported coverage. However, the Court of Appeals disagreed that these were “normal” covered uses of the car and affirmed summary judgment on coverage and the statutory claims.
The Court of Appeals reversed summary judgment for USAA on the tort of bad faith as it relates to claim investigation and evaluation. The Court seemed to be most concerned that in-house counsel had “suggested [the adjuster] pursue various unsupported leads, and had eventually concluded USAA should deny coverage because Haygood made for an unsympathetic plaintiff.” The bad faith claim was remanded for trial because “Haygood might establish bad faith in a variety of ways — whether by proving Defendants failed to deal fairly in handling the claim, failed to conduct a fair investigation, or failed to fairly evaluate coverage, among other possibilities.”
With this opinion, New Mexico remains firmly in the column of states where the tort of bad faith may be “untethered” from coverage.
Haygood v. United Servs. Auto. Ass’n, No. A-1-CA-36158, 2019 WL 4415247(N.M. Ct. App. Sept. 5, 2019).
