The Doctrine of Moral Hazard | Anthony R. Friedman

With regard to Anthony R. Friedman, personal injury attorney d.b.a. the Friedman law Firm in St. Louis, St. Charles, Missouri I, Albert Pepper Jr. previously reported that Friedman was operating his law firm for perhaps as long as two years (2024/25) without a professional liability policy creating risk to both clients and referring attorneys in the event of professional misconduct or tortious business practices perpetrated by Friedman and that after the publication of this fact Friedman did obtain a policy as per his annual filing with the Illinois ARDC for the year 2026 and confirmed via ARDC web inquiry and reported on January 5, 2026.

However, does retaining a professional liability policy effectually mitigate risk for a client or for that of a referring attorney? The immediate "impression" would be yes, yet the answer is much more nuanced whereas the ability to make a claim upon the policy seeking indemnification is embedded within the language of the policy itself. Clause, exclusions, etc. 

This requires due diligence for parties that may be effected by the terms of the policy to determine if the policy is robust with regard to the breadth of coverage and the policy limits of in perchance, the policy has so many restrictions and nominal caps that the policy may not even be worth the paper it is printed upon.

Consider an inadequate policy like a holographic image. You can see it, it has dimensions but when you reach for the hand to grasp it there is nothing tangible to apprehend.

Let us suppose that a policy retained does afford a reasonable level of risk mitigation to a client or referring attorney we now have to take into consideration the doctrine developed by insurance underwriters that an insured, within this context, Anthony R. Friedman d.b.a. the Friedman Law Firm LLC. in theory, may conduct his professional and business affairs in a reckless capacity now being insured and in particular if the insured demonstrated a reckless professional and business modality prior to being insured. With regard to Friedman the evidence suggests (though I make no statement of fact) that Anthony R. Friedman, now insured may now present with an increased risk to a client or referring attorney.

Below is a definition and description of Moral Hazard 

Moral hazard is a core economic and insurance theory describing the change in behavior that occurs when one party is insulated from the full consequences of their actions because another party bears the cost.

In its classic form, moral hazard arises after a contract or insurance policy is in place: the insured party has reduced incentive to act carefully or avoid risk because they know losses will be covered (at least partially) by someone else. This leads to increased risk-taking, negligence, or suboptimal effort that would not occur if the individual faced the full financial or personal downside.

Key elements of the theory:

• Asymmetric information — The insurer (or principal) cannot perfectly observe or control the insured's (agent's) behavior after coverage begins.
• Post-contractual opportunism — The problem emerges after the agreement is made, distinguishing it from adverse selection (which occurs before contracting).
• Behavioral shift — The protected party engages in more risky or careless conduct because the downside is shifted elsewhere.

Classic examples:

• A driver with full auto insurance may drive less cautiously.
• A tenant with landlord-provided fire insurance may be less diligent about fire prevention.
• An employee with job security may exert less effort.

Mitigation strategies (used by insurers and contract designers):

• Deductibles and co-payments (force the insured to share some loss).
• Policy exclusions and limits (cap exposure).
• Premium adjustments based on observed risk (experience rating).
• Monitoring, audits, or covenants (reduce information asymmetry).

In professional liability insurance (e.g., for attorneys), moral hazard can manifest if low policy limits, high deductibles, or eroding coverage create insufficient skin in the game—potentially leading the professional to pursue aggressive, low-probability strategies or accept marginal cases, knowing that excess liability falls on clients, co-counsel, or their own firm rather than the insurer.

The doctrine, first formalized in insurance economics in the 1960s–1970s (notably by Kenneth Arrow and Mark Pauly), remains a foundational concept in contract theory, risk management, and behavioral economics.

In conclusion. The argument I present is that any professional who retains a professional liability policy ironically may increase the risk to a client or referring professional whereas the policy itself may be of little value for the purpose of indemnification and that the professional now being insured may conduct their professional and business affairs in a reckless manner whereas their personal financial risk has to some degree been mitigated. 

Without regard to the quality and collectability of the policy if a claim is made the most imminent cause of concern is that an injured party be it a client or referring professional does not want to be found in the situation to make a claim at all. The process of sustaining an injury, making a claim, litigating a claim, the expense, the time, the uncertainty of the outcome is a situation that any prudent individual would want to avoid. The very process can be grievous to be born.

The attached pdf document treats the subject of an insured and the doctrine of moral hazard specifically with regard to referring professionals and attorneys. Though it does not specifically treat the subject with regard to an insured and moral hazard for the attorney client relationship this information can be introduced to Artificial Intelligence, Large Language Models for consideration as to how these doctrines, theories and arguments may apply to the attorney, client relationship. 

Sincerely:  Albert B. Pepper Jr.

litigant pro se, Consumer Advocate, Citizen Journalist

Academia Edu

https://www.academia.edu/145927888/2026_Advisory_to_Referring_Counsel_Due_Diligence_Requirements_for_Joint_Responsibility_Referrals_Involving_Anthony_R_Friedman_MO_Bar_65531