How do conflict of interest errors affect malpractice coverage?

Conflict of interest violations rank among the top categories of legal malpractice claims. When an attorney represents clients with adverse interests without proper disclosure and consent, or continues representation despite a disqualifying conflict, the resulting harm to clients can generate substantial malpractice claims. Your malpractice policy generally covers the defense and indemnity costs of these claims, provided the conflict was unintentional or the result of negligent conflict checking.

The critical distinction is between negligent and intentional conflicts. If your firm failed to identify a conflict because your conflict checking system was inadequate, because a new matter was not properly screened, or because the conflict arose from circumstances that were not reasonably foreseeable, the resulting claim is a covered professional error. However, if you knowingly proceeded with representation despite an identified conflict, the carrier may deny coverage on the grounds that the act was intentional or that you had prior knowledge of the wrongful act.

Conflict-related claims are expensive because they often involve multiple clients, multiple matters, and complex questions about what information was shared or compromised. Disqualification motions can generate significant litigation costs even before the underlying malpractice claim is resolved. If the conflict led to the disclosure of confidential information to an adverse party, the damages can be substantial and difficult to quantify.

From a risk management perspective, robust conflict checking is one of the most effective ways to prevent malpractice claims. Implement a centralized conflict database that includes all current and former clients, adverse parties, related entities, and key witnesses. Run conflict checks at intake, when new parties are identified, and when new attorneys join the firm. Document your conflict checking procedures and results, as this documentation becomes essential evidence if a conflict-related claim is later asserted.