conflict of interest

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Conflicts of interest refer to ethical problems that may arise between parties with a preexisting relationship. For example, an attorney and a client; an attorney is representing a new client in an employment dispute with their employer, but that attorney also represents that employer. Therefore, the interests of the attorney and the employer conflict with the interests of the present client. 

Attorneys have a duty to zealously represent the interests of their client(s). In the event that the attorney has two or more clients, these duties can conflict such that it is impossible for the attorney to fulfill both at once. If an attorney has both the plaintiff and defendant in a given case as clients, advocating on behalf of one will inherently be advocating against the interests of the other. 

Conflicts of interest are particularly relevant in the field of insurance due to the duty to defend. In a standard insurance policy, the insurance company includes terms which grant them the right to control any insurance claim-related lawsuit the policyholder is involved in. In this scenario, the attorney(s) provided by the insurance company represent both the policyholder and the insurer, creating a potential conflict of interest. 

While the insurance company and policyholder’s interests are aligned in some scenarios, both parties would prefer the opposing side of the lawsuit to be unable to recover, the insurance company is sometimes incentivized to take actions that harm the interests of the policyholder. In cases where it is unclear if the policyholder’s conduct is covered by the insurance policy, the insurance company may want to decline an early settlement offer in the hope that the court will ultimately conclude they are not responsible for the damage. Rejecting this settlement, however, may expose the policyholder to greater liability should they lose at trial.

To resolve the issue of conflicts of interest in the field of insurance, insurance companies sometimes appoint cumis counsel, or separate counsel which exclusively represents the interest of the policyholder. 

In all fields, attorneys must take care to check for potential conflicts prior to accepting an individual as a client. Some lawyers and law firms use software in order to monitor conflicts of interest. An attorney who believes themselves subject to a potential conflict of interest has a duty to notify the judge of that conflict. The judge then decides if the conflict is severe enough to justify removing the attorney from the case. 

[Last updated in July of 2022 by the Wex Definitions Team]