Joe Barnard, CPA

How to Spot Conflicts of Interest Before Taking a Case

A conflict of interest exists for an attorney “if there is a substantial risk that the lawyer’s representation of the client would be materially and adversely affected by the lawyer’s own interests or by the lawyer’s duties to another current client, a former client, or a third person.” Understanding how to spot potential conflicts can help reduce the chance that you’ll face a professional complaint or malpractice lawsuit.

Not all situations in which an attorney has some interest lead to a conflict, and some conflicts may be waived with a client’s informed consent. The most important consideration is whether the connection or interest would be likely to influence the lawyer’s representation or exercise of independent professional judgment.

In What Situations Do Conflicts Arise?

Many relationships or prior interactions can create conflicts that preclude representation or require a client’s informed consent. Some kinds of relationships that may lead to conflict include

  • Persons with whom a lawyer has a business relationship or in whose business the lawyer has a financial interest;

  • Prior clients or opposing parties;

  • Family members;

  • Multiple parties to the same case wishing to be represented by the same attorney.

Attorneys are also precluded from doing certain things that would be intrinsically ethically problematic from a conflicts of interest perspective, such as lending funds to a client, soliciting gifts from a client, and preparing any instrument (such as a will, trust, or deed) that gives a substantial gift to the lawyer or a person related to the lawyer.

Finally, a situation in which a third party seeks to pay a client’s legal fees (such as a parent paying for a child’s attorney or an insurer paying for defense counsel) can also be a source of conflict. This is only permissible where

  • the client gives his or her informed consent,

  • the third party does not interfere with the attorney-client relationship, and

  • the lawyer maintains the duty of confidentiality owed to the client.

The vital part of avoiding a conflict in such a situation is that the lawyer’s independent professional judgment is exercised solely on behalf of the client, irrespective of the person paying the bills.

How Do You Check for and Prevent Conflicts?

Before agreeing to represent a new client and entering into a retention agreement, a thorough conflicts check should be done to ensure that none of the parties to a potential matter are current or former clients, other parties that may pose a conflict, lawyers who have represented other parties involved in your client matters, or other persons with possible conflicts.

Comprehensive and effective conflicts checking depends on maintaining accurate, easily referenced lists of clients, vendors, and other individuals to identify those who could potentially cause issues. This can be done using case management software or other database management tools, or it can be done using traditional low-tech methods like keeping binders.

Although small firms may not have access to the more tech-savvy resources of larger outfits, they also may have fewer contacts and thus fewer possible conflicts. Whatever method you choose, it’s an essential part of a successful law practice.

How Could a Conflict Affect E&O Coverage?

Many E&O policies will not extend coverage to situations where an attorney acts criminally, fraudulently, maliciously, or dishonestly. Taking a case where there is a fairly obvious conflict of interest could trigger this exclusion in some circumstances.

If an attorney knowingly does something he or she should know triggers an impermissible conflict, most policies require that they immediately provide notice to their insurer that they have reason to believe that they have breached a professional duty that might reasonably be expected to be the basis of a claim.

Even with the best conflict avoidance procedures in place, issues may arise that trigger a professional complaint or lawsuit. Having E&O insurance coverage throughout your career gives you peace of mind, covering the costs of defense and settlement or judgment and providing you with an experienced legal malpractice defense team.

Contact ProDefender today to discuss affordable coverage that fits your needs.


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