In any action where an insured prevails against an insurer who has not paid a claim on any type of first party coverage, the insured person may be awarded reasonable attorney's fees and costs of the action upon a finding by the court that the insurer acted unreasonably in failing to pay the claim.
History: 1953 Comp., § 58-8-36, enacted by Laws 1977, ch. 113, § 1.
ANNOTATIONSCross references. — For appellate costs, see 39-3-11 NMSA 1978.
For no costs being taxed against person seeking reinstatement in employment after leaving armed forces, see 28-15-3 NMSA 1978.
For costs of conviction, see 31-12-6 NMSA 1978.
For fees collected by supreme court clerk, see 34-2-5 NMSA 1978.
For fees and costs in magistrate courts, see 35-6-1 to 35-6-4 NMSA 1978.
For costs and attorney fees in garnishment proceedings, see 35-12-16 NMSA 1978.
For costs paid by county of origin in change of venue, see 38-3-11 NMSA 1978.
For costs in suit brought by representatives of infant, see 38-4-9 NMSA 1978.
For costs paid by guardians ad litem, see 38-4-17 NMSA 1978.
For witness fees, see 38-6-4 NMSA 1978.
For allocation of costs in partition action, see 42-5-8 NMSA 1978.
For costs in quieting title, see 42-6-7 NMSA 1978.
For bond for costs in habeas corpus proceeding, see 44-1-32 NMSA 1978.
For costs in quo warranto proceedings, see 44-3-11 NMSA 1978.
For costs of surety bonds, see 46-6-2 NMSA 1978.
For costs and attorney fees for prevailing party in suit under Uniform Owner-Resident Relations Act, see 47-8-48 NMSA 1978.
For costs and attorney fees in joinder of parties in action for mechanics' and materialmen's liens, see 48-2-14 NMSA 1978.
For each party paying own costs in review of public service commission orders, see 62-13-3 NMSA 1978.
For costs and attorney fees in joinder of action for liens on oil and gas wells and pipelines, see 70-4-9 NMSA 1978.
For costs in special proceedings determining validity of irrigation district bonds, see 73-9-59 NMSA 1978.
For jury fees, see Rule 1-038 NMRA.
For costs on previously dismissed action, see Paragraph D of Rule 1-041 NMRA.
For costs of judgments, see Paragraph D of Rule 1-054 NMRA.
For magistrate court civil trial costs, see Rule 2-701 NMRA.
For judgment costs in criminal cases, see Rule 5-701 NMRA.
For costs on appeal, see Rule 12-403 NMRA.
The purpose of this section is to encourage insurers to pay out injury or damage claims promptly without placing on their insureds the unreasonable burden of having to bring a lawsuit to collect what they are entitled to under the policy in order to make themselves whole; however, it is not aimed at holding out the threat of an award of attorney's fees any time an insurer challenges any issue, and is simply designed to encourage insurers to resolve any doubt in favor of the insured and to pay off the claim quickly in order to make the insured whole after a loss. Amica Mut. Ins. Co. v. Maloney, 1995-NMSC-059, 120 N.M. 523, 903 P.2d 834.
The term "first party coverage" applies to the underlying claim for coverage under a policy and not to a subsequent dispute over the amount of subrogation interest which the insurer is entitled to receive. Amica Mut. Ins. Co. v. Maloney, 1995-NMSC-059, 120 N.M. 523, 903 P.2d 834.
Fee award on appeal. — This section does not limit the award of attorney's fees to the insured who prevails at trial only, but also includes a fee award for successful defense on appeal. Stock v. Adco Gen. Corp., 1981-NMCA-075, 96 N.M. 544, 632 P.2d 1182, cert. denied, 96 N.M. 543, 632 P.2d 1181.
This section does not limit an award of attorney fees and costs only to trial. In the appropriate case, a first party insured who prevails on appeal may be awarded reasonable attorney fees and costs for the appeal. Jessen v. Nat'l Excess Ins. Co., 1989-NMSC-040, 108 N.M. 625, 776 P.2d 1244.
Award of attorney fees and costs on appeal of bad faith claim. — Where the insured was awarded judgment against the insurer because the insurer acted in bad faith in denying coverage and the court of appeals affirmed the judgment, the insured was entitled to attorney fees and costs because Rule 12-403 NMRA allows the court of appeals to award attorney fees for services rendered on appeal in cases where an award of attorney fees is permitted by law, and Section 39-2-1 NMSA 1978 permits a court to award attorney fees in cases in which the court finds that the insurer acted unreasonably in failing to pay a claim. Am. Nat'l. Prop. & Cas. Co. v. Cleveland, 2013-NMCA-013, 293 P.3d 954.
Not unreasonable failure to pay where amount of claimed damages is questionable. — Although an insurer may have unreasonably failed to acknowledge coverage under a policy, since the insurer had a reasonable basis for questioning the amount of claimed damages, it did not act "unreasonably in failing to pay the claim." United Nuclear Corp. v. Allendale Mut. Ins. Co., 1985-NMSC-090, 103 N.M. 480, 709 P.2d 649.
Denial of insurance claim was not unreasonable. — Where insurance company's denial of the insured's claim was not in bad faith, but was based upon evidence accumulated after a reasonable investigation, the insurance company's denial of the insured's claim was not unreasonable and the award of attorney's fees to the insured was not proper. Suggs v. State Farm Fire and Casualty Company, 833 F.2d 883 (10th Cir. 1987), cert. denied, 486 U.S. 1007, 108 S.Ct. 1732, 100 L. Ed. 2d 196 (1988).
Statutory attorney's fees are authorized in favor of insured upon a finding that the insurance company has acted in bad faith. Yumukoglu v. Provident Life & Acc. Ins. Co., 131 F.Supp. 2d 1215 (D.N.M. 2001).
Request for attorney fees was timely even though the fees were never pled or requested under this section until after the case was disposed of on summary judgment. Sipp v. UNUM Provident Corp., 107 Fed. Appx. 867 (10th Cir 2004).
Award of attorney's fees was improper where the insurer's denial of a claim was not in bad faith, but was instead based upon evidence accumulated after a reasonable investigation. Suggs v. State Farm Fire & Cas. Co., 833 F.2d 883 (10th Cir. 1987), cert. denied, 486 U.S. 1007, 108 S. Ct. 1732, 100 L. Ed. 2d 196 (1988).
Insurer's duty to investigate. — Beyond comparing the pleadings of the underlying litigation with the coverage provisions of the policy, an insurer did not have the duty of investigating third-party claims before making the determination whether to defend its insured. Valley Improvement Ass'n v. U.S. Fid. & Guar. Corp., 129 F.3d 1108 (10th Cir. 1997).
Jury verdict supports award of fees. — Insured's entitlement to attorney's fees was established by the factual determinations implicit in the jury's award of punitive damages. O'Neel v. USAA Ins. Co., 2002-NMCA-028, 131 N.M. 630, 41 P.3d 356, cert. denied, 131 N.M. 737, 42 P.3d 842 (2002).
Denial of attorney's fees not improper. — The trial court's refusal to award attorney's fees to an insured in a suit against her insurance company for the payment of proceeds was not error because the insurance company's denial of the claim for failure to comply with conditions precedent was both nonfrivolous and reasonable, even though the denial turned out ultimately to have been in error. Jackson Nat'l Life Ins. Co. v. Receconi, 1992-NMSC-019, 113 N.M. 403, 827 P.2d 118.
Am. Jur. 2d, A.L.R. and C.J.S. references. — 20 Am. Jur. 2d Costs § 63 et seq.; 44 Am. Jur. 2d Insurance § 1772; 46 Am. Jur. 2d Judgments § 113.
Judgment, correction of clerical mistake in, respecting costs, 10 A.L.R. 612, 67 A.L.R. 828, 126 A.L.R. 956, 14 A.L.R.2d 224.
Keeping tender good, necessity of in equity to stop costs, 12 A.L.R. 953.
Grantee assuming mortgage debt as liable for costs of foreclosure proceedings, 21 A.L.R. 529, 76 A.L.R. 1191, 97 A.L.R. 1076.
Joint tortfeasor's liability for costs as affected by satisfaction of judgment by other tortfeasor, 27 A.L.R. 819, 65 A.L.R. 1087, 166 A.L.R. 1099.
Accommodation party's right to recover costs as against accommodated party after payment of paper, 36 A.L.R. 596, 77 A.L.R. 668.
Conditional pardon, requirement in, that convict pay cost of trial, 60 A.L.R. 1416.
Voluntary character of payment of tax or assessment made to avoid costs, 64 A.L.R. 42, 84 A.L.R. 294.
Apportionment of cost where judgment is against plaintiff on his complaint and against defendant on his counterclaim, 75 A.L.R. 1400.
Injunction to stay enforcement of judgment for costs pending final determination of case, right to, 78 A.L.R. 359.
Costs in habeas corpus, 81 A.L.R. 151.
Bail bond, right of surety on, to relief from forfeiture of, in event of subsequent surrender or production of principal as depending upon payment of costs, 84 A.L.R. 455.
Declaratory judgment, costs in proceeding to obtain, 87 A.L.R. 1249.
Warehouseman interpleading rival claimants to funds in his hands, right of, to allowance of costs out of funds, 100 A.L.R. 433.
Divorce suit, effect of death of party to, before final decree, on liability of estate for costs, 104 A.L.R. 667, 158 A.L.R. 1205.
Interpleader, question whether insurance company as a disinterested stakeholder for purposes of, as affected by claim of company, or one of the claimants to proceeds to policy, for costs and fees, 108 A.L.R. 270.
Set off as between judgments where one or both are for costs, 121 A.L.R. 509.
Trust, court costs or cost of litigation as payable from income or corpus of, 124 A.L.R. 1193.
What persons or corporations, contracts or policies, are within statutory provisions allowing recovery of attorneys' fees or penalty against companies dealing in specified kinds of insurance, 126 A.L.R. 1439.
Financial inability to pay costs of original action as affecting liability to stay of subsequent action, 156 A.L.R. 956.
Nonresident's duty to furnish security for costs as affected by joinder or addition of resident, 158 A.L.R. 737.
Constitutionality, construction and application of statutes requiring security for costs or expenses in case of stockholder's action and right of corporation, 159 A.L.R. 978.
Allowance of attorneys' fees in, or other costs of, litigation by beneficiary respecting trust, 9 A.L.R.2d 1132.
Right to sue in forma pauperis as dependent on showing of financial disability of attorney or other nonparty or nonapplicant, 11 A.L.R.2d 607.
Allowance of fees for guardian ad litem appointed for infant defendant as costs, 30 A.L.R.2d 1148.
Taxable costs and disbursements as including premiums paid on bonds incident to steps taken in action, 90 A.L.R.2d 448.
Construction, as to terms and conditions, of state statute or rule providing for voluntary dismissal without prejudice upon such terms and conditions as state court deems proper, 34 A.L.R.4th 778.
Attorneys' fees: obduracy as basis for state-court award, 49 A.L.R.4th 825.
Liability insurance: third party's right of action for insurer's bad-faith tactics designed to delay payment of claim, 62 A.L.R.4th 1113.
Attorney's personal liability for expenses incurred in relation to services for client, 66 A.L.R.4th 256.
Policy provision limiting time within which action may be brought on the policy as applicable to tort action by insured against insurer, 66 A.L.R.4th 859.
Recoverability of cost of computerized legal research under 28 USCS § 1920 or Rule 54(d), Federal Rules of Civil Procedure, 80 A.L.R. Fed. 168.
Pre-emption by Longshore and Harbor Workers' Compensation Act (33 USCS §§ 901 et seq.) of state law claims for bad-faith dealing by insurer or agent of insurer, 90 A.L.R. Fed. 723.
20 C.J.S. Costs §§ 46, 125 to 133; 46A C.J.S. Insurance § 1576 et seq.