125 N.J.L.J. 894
April 5, 1990
Conflict of Interest: Law Firm
Retained By Insurance Carrier
for Municipality or Self-Insured
Private Clients Before Municipal Boards
The following questions concerning the municipal practice of
a law firm representing a municipality in tort litigation have been
1. Whether a law firm which has been retained by the insurance carrier for a municipal entity to represent that entity in the defense of one or more liability actions brought against it may appear before municipal boards, such as the zoning board, or prosecute tax appeals against that municipality?
2. Whether law firm may undertake the activity set forth in Question 1, supra, if the municipality is self-insured through a joint insurance fund?
The portion of Question 1 concerning the law firm's appearance before municipal boards is governed and controlled by Opinion 428, 104 N.J.L.J. 1 (1979). In said opinion, we determined that an attorney chosen by an insurance company for the purpose of representing a municipal body in a particular matter is not truly a municipal attorney in the sense of being a member of the official family appointed to a position by the governing body. Thus, there is little likelihood that the general public would associate the attorney with the municipal government so as to give any appearance of a conflict of interest. Consequently, we held that the attorney in question could appear before various boards in the municipality.
The portion of Question 1 concerning the law firm's prosecution of tax appeals against the municipality presents a different problem. In those instances, the attorney representing the appealing taxpayer is in direct confrontation with the municipality, as distinguished from the earlier situations where the attorney is presenting a matter for approval by a planning board or zoning board of adjustment. Therefore, a conflict of interest as well as an appearance of impropriety arises and prosecution of tax appeals against the municipality would be improper. Cf. Goldberg v. Atlantic City, 4 N.J. Tax 195 (Tax Ct. 1982).
The second question concerns the municipal practice of a law firm representing a self-insured municipality. This question differs from the first and is discussed separately because many municipalities have chosen not to carry liability insurance policies, opting instead to associate themselves in a joint insurance fund. N.J.S.A. 40A:10-36 et seq.; N.J.A.C. 11:15-2.1, et seq.
Inquirer advises that a joint insurance fund is, in many respects, operated in a manner similar to that of a liability insurance carrier. Of particular relevance to this inquiry is the fact that in the event a municipality needs representation, the fund assigns the matter to one of a number of available defense attorneys. The attorney, in turn, receives compensation through the fund, not from the individual municipality. Therefore, as in the situation where an attorney has been retained by an insurance company, there is little likelihood that the public would associate such an attorney so closely with the municipal government as to give rise to any appearance of a conflict of interest insofar as the attorney's municipal practice is concerned. The Committee's determinations concerning attorneys or law firms retained by insurance companies apply with equal force to such lawyers and law firms as are retained by self-insured municipalities through a joint insurance fund.