IN RE: JOSEPH EDWARD SLOAN, Debtor; JOSEPH EDWARD SLOAN and BYRON Z. MOLDO, Chapter 7 Trustee, Plaintiffs-Appellants and Cross-Appellees, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellee and Cross-Appellant., 135 N.M. 106

Summary

A federal district court granted the insurer's motion for judgment as a matter of law on the insureds' claim for punitive damages against the insurer for bad-faith failure to settle. The trial court instructed the jury on the bad-faith standards for both failure-to-settle actions and first-party failure-to-pay actions. The jury found that the insurer acted in bad faith and awarded compensatory damages. The court concluded that, under New Mexico law, bad-faith conduct by an insurer typically involved a culpable mental state, and therefore the determination whether the bad faith evinced by a particular defendant warranted punitive damages was ordinarily a question for the jury to resolve. The court overruled Teague-Strebeck Motors, Inc. v. Chrysler Ins. Co., 985 P.2d 1183 (N.M. 1999), to the extent that it would have, in every insurance-bad-faith case, required a showing of an additional culpable mental state to permit an instruction on punitive damages. The court added that a trial ...