Opinion ID: 465282
Heading Depth: 1
Heading Rank: 4

Heading: Breach of Duty of Good Faith Dealings

Text: 16 New Mexico recognizes the tort of bad faith delay or refusal to pay a valid claim by an insured. State Farm General Insurance Co. v. Clifton, 86 N.M. 757, 527 P.2d 798 (1974). Bad faith failure to pay means a frivolous or unfounded refusal to pay. Chavez v. Chenoweth, 89 N.M. 423, 429, 553 P.2d 703, 709 (Ct.App.1976). Because Woodmen had no obligation to pay the St. Francis expenses, its refusal to pay, by definition, was not frivolous or unfounded. 17 Mr. Bryant argues that even if Woodmen had no duty to pay, its delay in communicating denial of payment of his insurance claim constitutes bad faith. Mr. Bryant points out that five months passed before Woodmen denied the St. Francis claim. He contends that had he known soon after admitting Robert to St. Francis that there was no insurance coverage, he could have at least attempted to transfer Robert to a hospital that did satisfy the definition of a hospital under policy 3636. 18 We believe Chavez v. Chenoweth, supra, disposes of this issue. In Chenoweth, the insured brought a tort claim against the insurer for delay in paying her medical expenses. The court stated: 19 The claim is a tort claim for unreasonable delay in paying medical expenses under the insurance contract. Such a tort claim provides a basis for recovery if there is evidence of bad faith. Bad faith means a frivolous or unfounded refusal to pay. 20 89 N.M. at 429, 533 P.2d at 709 (citation omitted). Thus, it appears that even the tort of bad faith delay to pay a claim by an insurer requires that there be a frivolous or unfounded refusal to pay. Without a showing that there is no reasonable basis for denying the claim, Mr. Bryant's claim for wrongful delay must fail.