How Small Law Firms Miss a Conflict of Interest Before the Engagement Letter Goes Out
The riskiest moment in a small law firm's week is not a hearing or a filing deadline. It's the few minutes after a promising new client hangs up the phone and someone on staff decides whether to open the file.
Before an engagement letter goes out, a lawyer has to check that taking this client will not conflict with a client the firm already represents, or represented in the past. It sounds like a formality. It is actually one of the oldest sources of legal malpractice claims, and the busier and leaner a firm runs, the easier it is to shortcut.
What a conflict check is supposed to catch
North Carolina's Rule of Professional Conduct 1.7 defines a conflict two ways: the new client's interests are directly adverse to an existing client, or representing the new client would be materially limited by the firm's duties to someone else, a former client, a third party, or the lawyer's own interests. Before taking on a client despite a conflict, the lawyer has to reasonably believe competent representation is still possible, confirm the law allows it, make sure the two clients are not on opposite sides of the same matter, and get informed consent from everyone affected, in writing.
None of that is optional because a firm is small. The rule does not carve out an exception for a two-lawyer practice running intake out of a shared inbox.
Why small firms are the ones who skip it
Conflicts of interest have stayed a leading cause of malpractice claims for decades, and the insurer ALPS reports that conflict-of-interest claims are at an all-time high, alongside settlement-related claims. The pattern insurers describe is rarely a lawyer who ignores the rule. It's a lawyer or staff member who runs the check from memory, or searches a shared inbox and the case file list by hand during a fifteen-minute intake call, and misses a name because it came up eight months ago on a different matter, spelled slightly differently, or tied to a company instead of a person.
The American Bar Association's Legal Technology Survey found conflict-checking software available at 63 percent of firms, tied with case management software as the most common category firms report. That still leaves a large share of firms, especially small ones, checking a spreadsheet, a filing cabinet, or someone's recollection instead of a searchable record.
What actually closes the gap
The fix is not a new compliance step bolted onto intake. It's making the check as fast and complete as the intake call itself. An AI agent can read intake notes as they're entered and cross-reference every name mentioned (the client, the opposing party, any company or family member that comes up) against the firm's existing client and matter list. If it finds a possible match, close in spelling, a shared address, a related entity, it flags it before the engagement letter goes out, not after.
The agent does not decide whether the conflict is real or waivable. That call, and the informed-consent conversation it might require, stays with the lawyer. What changes is that the flag shows up before the file opens instead of surfacing months later when it's expensive to unwind. The same read-and-flag pattern works on the rest of intake too: matching a new caller against a former client, catching a duplicate matter, or noticing a related party already on the firm's books.
If your firm checks conflicts from memory or a shared spreadsheet, that's a normal place to be, not a failure. It's also a workflow AI agents are well suited to close without changing how your intake actually runs. See how the intake and document work fits together, or read more about what we build for law firms. Start with a free workflow review and we'll tell you honestly whether this is worth automating for your firm.
Sources: North Carolina State Bar, Rule 1.7 (Conflict of Interest: Current Clients); ALPS Insurance, on ABA malpractice claims trends; MyCase, on the ABA Legal Technology Survey.