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New York State Court Rules No Settlement Due to Medicare Mistake

On March 15, 2018, the Supreme Court of the State of New York, in New York County, published its opinion on Daniel Mayo, as the Administrator of the Estate of Annette Mayo v. NYU Langone Medical Center, finding that the parties’ Settlement Agreement is not binding on the plaintiff since it was not executed by the defendant or the insurer, as required under the express terms of the Settlement Agreement. In addition, the court concludes that the Settlement Agreement was the product of a mutual mistake based on the parties’ incorrect belief that the Medicare lien was $2,824.50, when in fact it was $145,764.08. The court therefore rules there is no settlement and orders the action back to the trial calendar.



Since they are federal topics, we are used to federal court opinions defining and explaining Medicare and Medicaid issues. However, once in a while we see state court opinions with significant Medicare and/or Medicaid ramifications. This New York medical malpractice claim decision is one of those; it is a perfect example of how inappropriately handling conditional payment issues can and will cause huge problems, including blowing up your settlement. For those of us who have been practicing law for over 30 years, historically it has always been plaintiff counsel who assumed the responsibility for resolving Medicare liens. This case, without question, highlights the need for defendants, insurers, and their counsel to revisit that old theorem and instead develop a new process in which the payer takes on the responsibility for assuring appropriate handling and correct reimbursement of Medicare conditional payments.


Facts of the Case

Annette Mayo (Decedent) was treated at NYU Langone Medical Center (Defendant). She entered the hospital on November 9, 20I0, for a total hip replacement. On November 13, 2010, she fell out of her bed, and underwent right hip revision surgery. During her hospitalization, decedent contracted Clostridium Difficile (a gastrointenstinal bacterial infection), which extended her hospitalization and required various procedures. Decedent was discharged from the defendant hospital to a skilled nursing home facility in March 2011, and died on May 24, 2014. Daniel Mayo, as the administrator of decedent’s estate (Plaintiff) filed a claim alleging that defendant failed to timely diagnose decedent with Clostridium Difficile, and failed to appropriately secure and supervise her.

On January 15, 2015, the Center for Medicare and Medicaid Services (CMS) sent a conditional payment letter requesting $2,824.50 in overpayment, and attached a payment summary form listing the claims adding up to the total. The letter advised that “the conditional payment amount listed above is an interim amount. We are still reviewing medical claims related to your case.”

On July 21, 2015, CMS sent another conditional letter requesting $1,811.95 for overpayment, which letter contained the same language as to January 15, 2015 letter, advising that the amount listed was an interim amount and was still being reviewed.

By letter dated January 5, 2016, which was copied to defendant’s counsel, plaintiff notified the court that the action had been settled for $725,000 “inclusive of all liens, attorneys fees, without costs to either side.” By letter dated January 6, 2016, plaintiff counsel wrote defendant’s counsel that “the final Medicare lien amount is $1,811.95,” and requested that he forward releases. Also, on January 6, 2016, plaintiff counsel signed a stipulation of discontinuance, which was never filed with the court.

On January 6, 2016, counsel for defendant sent plaintiff counsel the Settlement Agreement, a 9-page document, indicating the insurer would pay $725,000. The breakdown was as follows: Medicare $2,824.50, the remaining $722,175.50 payable to Daniel Mayo as Executor of the Estate of Annette Mayo and Krentsel & Guzman, LLP, plaintiff’s attorneys.

On January 20, 2016, plaintiff and his counsel executed the Settlement Agreement, and on January 22, 2016, plaintiff counsel sent a letter with the executed Settlement Agreement enclosed and requested payment.


The Medicare Lien

On that same date, January 20, 2016, CMS sent a final lien letter to plaintiff and his counsel notifying them that Medicare was seeking repayment of $145,764.08 for the cost of the decedent’s medical care, and attached a list of its payments made on decedent’s behalf.

On February 2, 2016, plaintiff counsel challenged Medicare’s demand amount writing that “after the plaintiff accepted the settlement in reliance on the $1,811.95 amount stated in the July 15, 2015 letter, we informed Medicare of the settlement and awaited a demand letter fully expecting it to be lower than the conditional payment amount cited in accordance with our prior dealings with MSPRC (Medicare Secondary Payer Recovery Contractor). Instead, we were shocked to receive the January 22, 2016 letter with a demand amount of$145,764.08. It is unclear where this demand amount is coming from, however, this settlement offer was made only in contemplation of decedent’s pain and suffering and not for her medical bills which are not part of the settlement amount.”

On March 3, 2016, Medicare upheld its previous determination. Plaintiff requested reconsideration, and on September 8, 2016, the Qualified Independent Contractor (QIC) issued an unfavorable reconsideration decision upholding the prior determination.

Plaintiff next sought review before an Administrative Law Judge (ALJ) from the Office of Medicare Hearings and Appeals. On May 15, 2017, the ALJ found that plaintiff was responsible for the conditional payments, plus interest.
In the meantime, in the year and half that had since passed, neither defendant nor its insurer signed the Settlement Agreement, nor did the insurer proffer payment in accordance with the Settlement Agreement. In addition, judgment was never entered, and no stipulation of discontinuance was ever filed.


Plaintiff Argues Settlement Agreement is Null and Void Because of Medicare Lien Error

Plaintiff here moves to declare the Settlement Agreement null and void, arguing it was entered into under an erroneous assumption based on the conditional letters from Medicare that the maximum amount that Medicare would assert was $2,824.50. Plaintiff further argues that the Settlement Agreement is not binding as it was never filed with the county clerk, and is not signed by both parties.

Defendant opposes the motion, asserting that the Settlement Agreement is enforceable as it satisfies the statutory writing requirement, and was not entered into as the result of a “mutual mistake,” but, rather, plaintiff’s unilateral error in failing to ensure that the amount of the Medicare lien was correct. In this connection, defendant argues that investigating the extent of the Medicare liens was the sole responsibility of plaintiff, and that his failure to ascertain the correct amount of the liens is a “unilateral mistake,” and thus does not provide a basis for voiding the Settlement Agreement.

Defendant further argues that the Settlement Agreement is binding upon plaintiff since it was signed by plaintiff and his attorney, that the clear and unambiguous language of the agreement shows that it should be enforced according to its terms, and that although the agreement provides that it is not effective unless executed by the parties, the construction and drafting of the agreement demonstrates that no signature was required of defendant (or its representative) in order to make the agreement binding.

Did the Parties Intend to be Bound by the Terms of the settlement Agreement?

The threshold issue is whether the Stipulation of Settlement is enforceable. Assuming the Settlement Agreement satisfies the minimum requirement of a signed written instrument under CPLR 2104, to enforce the Settlement Agreement under the rules of contract law, it must be found that the parties intended to be bound by its terms in the absence of the signature of defendant or its representative.

“In determining whether a contract exists, the inquiry centers upon the parties’ intent to be bound, i.e., whether there was a ‘meeting of the minds’ regarding the material terms of the transaction.” In general, a written contract signed by the parties is not necessary to form a contract as long as the agreement contains its essential terms, and “there is objective evidence establishing that parties intended to be bound.” However, “it is well settled that, if the parties to an agreement do not intend it to be binding upon them until it is reduced to writing and signed by both of them, they are not bound and may not be held liable until it has been written out and signed.”

Here, the Settlement Agreement provides that “it shall become effective upon execution by the parties,” which provision is indicative of the parties’ intent that it would not be binding until executed by the parties. Accordingly, the court finds that the Settlement Agreement is not binding on the plaintiff since it was not executed by the defendant or the insurer, as required under the express terms of the Settlement Agreement.


The Settlement Agreement is Unenforceable Because of Mutual Mistake

Next, the court finds that even if the Settlement Agreement were enforceable in the absence of a signature from defendant or the insurer, it would be “subject to vacate on the grounds of mutual mistake.” In general, to vacate a stipulation of settlement, the moving party must show that a mutual mistake existed at the time the stipulation was entered that was so substantial that it prevented a meeting of the minds.

The court finds plaintiff has met this burden by demonstrating that the Settlement Agreement was the product of a mutual mistake based on the parties’ incorrect belief, as reflected in the record demonstrating that the parties’ negotiations were based on an assumption that the Medicare lien was $2,824.50, when it was actually $145,764.08.

Furthermore, given the more than $140,000 difference between the two lien amounts, plaintiff has demonstrated that the error was sufficiently substantial so as to prevent a meeting of the minds as to the $750,000 settlement. In addition, because the Settlement Agreement was drafted by defendant, the error cannot be attributed to a unilateral mistake by the plaintiff, but was in fact a mutual mistake.



In view the above, the court concludes that the Settlement Agreement is not binding on the plaintiff and is therefore vacated. As requested by plaintiff, the action was restored to the trial calendar and were ordered to appear for a pre-trial conference on April 19, 2018, at 2:30 pm in New York, NY.

It is hard to imagine that experienced and capable plaintiff and defense counsel would have relied upon what was clearly identified as a non-final, but interim conditional payment report from Medicare to settle the file. As the parties found out here the hard way, Medicare will only provide a final demand for reimbursement of conditional payments related to the claim upon learning of settlement of the claim.

Resolution of Medicare payments is no longer a matter of concern only to the plaintiff and his/her counsel. It is, as this case clearly shows, of great significance and importance to corporate entities, insurers, and their attorneys. As I have been recommending for a number of years, it is time that defendants, insurers, and their defense counsel create an internal process or hire a vendor to handle resolution of conditional payments. Doing so in a case like this one would have allowed them to learn early on of the correct amount due. This would have better prepared them to settle the file earlier, accurately, and without any complications. It is time.


About Rafael Gonzalez

Rafael Gonzalez, Esq. is President of Flagship Services Group. He has over 30 years of experience in the auto, liability, no-fault, and work comp industries. He is one of the country’s top experts on Medicare and Medicaid compliance, serving insurers, self-insureds, and third party administrators. He speaks and writes on mandatory insurer reporting, conditional payment resolution, set aside allocations, and professional administration, as well as the interplay and effect of these processes and systems and the Affordable Care Act throughout the country. Rafael blogs on these topics at Medicare Compliance for P&C Insurers at www.flagshipservicesgroup.com/blog. He is very active on LinkedInTwitter, Instagram, and Facebook. He can be reached at rgonzalez@flagshipsgi.com or 813.967.7598.


Rafael Gonzalez, Esq


About Medicare Conditional Payments

42 CFR Section 411.21 indicates that Medicare conditional payments are payments made by Medicare for medical treatment where a primary payer (insurer or self-insurer) has or may have an obligation to make such payment. Primary payers must reimburse Medicare for conditional payments it has made. 42 USC Section 1395y indicates that primary payers include group health providers, workers’ compensationliability and no-fault insurers and self-insured entities, as well as physicians, attorneys, hospitals, or clinics that receive payment from a primary payer must make reimbursement.

42 USC Section 1395y also indicates responsibility as a primary payer arises even if liability for the medical expense is contested. Such a responsibility can be demonstrated by entry of a judgment or by payment conditioned on a release or waiver of payment, even if liability is denied. 42 CFR Section 411.24 indicates Medicare has a direct right of action against all primary payers responsible for making payment. And, Medicare has a direct right of action against any person or entity that received a primary payment, including the Medicare beneficiary, medical provider, physician, attorney, state agency or private insurer.


About Medicare Advantage and Prescription Drug Plans Reimbursement

42 CFR Section 422.108(f) provides MAPs with the same rights of recovery that the Secretary of HHS has under the MSP regulations in subparts B through D of part 411 of 42 CFR. Additionally, the same MSP regulations at 42 CFR Section 422.108 are extended to PDPs at 42 CFR Section 423.462. Therefore, PDPs have the same MSP recovery rights as MAPs, which have the same recovery rights as HHS. This includes, as recent federal appellate and district court decisions have indicated, the ability to pursue double damages through MSP private cause of action pursuant to 42 USC Section 1395y(b)(3) should the primary payer deny the MAP or PDP reimbursement of any due conditional payments.


About Medicaid Third Party Liability Liens

42 USC Section 1396a mandates that all reasonable measures to ascertain legal liability for Medicaid payments and reimbursement of same be taken. The state or agency administering a Medicaid plan must take all reasonable measures to ascertain the legal liability of third parties to pay for care and services paid by Medicaid. Federal law also provides that in any case where such a legal liability is found to exist after medical assistance has been made available on behalf of the individual, the state or local agency must seek reimbursement for such assistance to the extent of such legal liability. 42 U.S.C. Section 1396a(a)(25).


About Flagship Services Group

Flagship Services Group is the premier Medicare and Medicaid compliance services provider to the property & casualty insurance industry. Our focus and expertise has been the Medicare and Medicaid compliance needs of P&C self-insureds, insurance companies, and third party administrators. We specialize in P&C mandatory reporting, conditional payment resolution, and set aside allocations. Whether auto, liability, no-fault, or work comp claims, we have assembled the expertise, experience and resources to deliver unparalleled MSP compliance and cost savings results to the P&C industry. To find out more about Flagship, our folks, and our customized solutions, please visit us at www.flagshipservicesgroup.com. To speak with us about any of our P&C MSP compliance products and services, you may also contact us at 888.444.4125 or info@flagshipsgi.com.

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Commercial Repayment Center Returned $131.78 Million to Medicare Trust Fund in FY 2017

Rafael Gonzalez, Esq. President, Flagship Services Group

As Required by Section 1893(h) of the Social Security Act, the United States Department of Health and Human Services (HHS), Centers for Medicare & Medicaid Services (CMS), Medicare Secondary Payer (MSP) Commercial Repayment Center (CRC) published its third annual report to Congress for FY 2017 in March 2018. https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Coordination-of-Benefits-and-Recovery-Overview/Downloads/The-Medicare-Secondary-Payer-Commercial-Repayment-Center-in-Fiscal-Year-2017.pdf. Based on the Group Health Plan (GHP) and Non-Group Health Plan (NGHP) recovery work of the CRC, for FY 2017 (October 1, 2016 through September 30, 2017), CMS returned $131.78 million dollars to the Medicare Trust Funds.

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Connecticut Federal District Court Allows MAO PCA Against Corporate Defendant, But Not Against Beneficiary and Her Attorneys

Rafael Gonzalez, Esq. President, Flagship Services Group


On March 13, 2018, the United States District Court for the District of Connecticut published its decision on Aetna Life Insurance Company v. Nellina Guerrera, Carter Mario Injury Lawyers, attorney Sean Hammil, attorney Danielle Wisniowski, and Big Y Foods, Inc. concluding that the MSP Private Cause of Action provision unambiguously permits suit by MAOs and, further, that even if it was ambiguous, 42 CFR section 422.108(f) grants MAOs the right to sue under the Private Cause of Action provision. The court also finds that suit may be brought against a primary plan, but not against beneficiaries or their attorneys. The court also concludes that suit may be brought against Big Y, as its settlement payment to Guerrera and/or her attorneys was not appropriate reimbursement under the MSP.

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Florida Federal District Court Holds Advantage Plans May Seek Double Damages from Medical Providers if Failed to Reimburse

Rafael Gonzalez, Esq. President, Flagship Services Group


On March 20, 2018, the United States District Court for the Southern District of Florida published its opinion on MSPA Claims 1, LLC v. Bayfront HMA Medical Center, LLC, concluding that because CMS has a right of action to recover its payments from any entity, including a beneficiary, provider, supplier, physician, attorney, state agency or private insurer that has received a primary payment, Medicare Advantage Organizations also have a private cause of action for double damages against the recipient of a primary payment, in this case Bayfront, a medical provider.
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Florida Federal District Court Concludes Medical Providers Are Not Subject to Double Damages Under MSP Act Private Cause of Action

Rafael Gonzalez, Esq. President, Flagship Services Group

On March 2, 2018, the United States District Court for the Middle District of Florida, Orlando Division, published its opinion on MSPA Claims 1, LLC v. Halifax Health, Inc., in which the court found that a private right of action under the Medicare Secondary Payer Act, 42 U.S.C. §1395y(b) et seq. (MSP Act), which provides for double damages in the event of untimely reimbursement of Medicare payments in certain circumstances, is unavailable against providers of medical services. Based on such ruling, the court dismissed with prejudice claims that had been raised under the MSP Act against Halifax Hospital Medical Center, a public hospital based in Daytona Beach, Fla.

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New Work Comp MSA Review Contractor Starts 3/19/18; No Expected Changes and No News on Liability MSAs

Rafael Gonzalez, Esq. President, Flagship Services Group

It has been a long time coming, two years to be exact. After the Centers for Medicare and Medicaid Services (CMS) announced their anticipated release of a solicitation for the Workers’ Compensation Review Contractor (WCRC) in 2016 and 2017 and further announced it was continuing to consider expanding its voluntary MSA review process to include liability insurance (including self-insurance) and no-fault insurance MSA amounts in 2016 and 2017, Medicare Secondary Payer (MSP) stakeholders never thought the day would come. But, after a challenge of the awarded contract and after several months during which Provider Resources continued to work under an expired contract, on March 7, 2018, CMS finally held the WCRC Transition Webinar to introduce Capitol Bridge, LLC, the new workers’ compensation review contractor.

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NCCI Publishes 2018 Update on Medicare Set Asides and Workers Compensation

Rafael Gonzalez, Esq. President, Flagship Services Group

On February 8, 2018, the National Council on Compensation Insurance (NCCI) published its MEDICARE SET-ASIDES AND WORKERS COMPENSATION— 2018 UPDATE (study), written by Nedžad Arnautović. The study can be found at https://www.ncci.com/Articles/Documents/II_MSA-WC-Study.pdf What follows is a verbatim rendition of the facts, analysis, findings and conclusions found in the report.



“In September 2014, NCCI published a study on Medicare Set-Asides (MSAs) in workers compensation. Using the sample of MSAs submitted to the Centers for Medicare & Medicaid Services (CMS) between September 2009 and November 2013 and completed between January 2010 and November 2013, the study examined several aspects related to Medicare Set Asides (MSAs), such as the distribution of amounts of MSAs and total settlements that include MSAs, claimants’ age distribution, the duration of time from submission to CMS approval, and the relation between submitted and CMS-approved MSA amounts. This paper provides an update and expansion of the previous MSA study using the larger data sample as well as additional experience from 2014 and 2015.”

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Here We Go Again, as New Medicare Contractor Takes Over Reimbursement of Conditional Payments When ORM Accepted

Rafael Gonzalez, Esq., President, Flagship Services Group


After 35 years of seeking reimbursement of conditional payments post settlement, judgment, award, or payment of a case, in 2015, the Centers for Medicare & Medicaid Services (CMS) transitioned a portion of the Non-Group Health Plan (NGHP) Medicare Secondary Payer (MSP) recovery workload from the Benefits Coordination & Recovery Center (BCRC) to its Commercial Repayment Center (CRC). As a result, on October 5, 2015, the CRC assumed responsibility for the recovery of conditional payments where CMS is pursuing recovery directly from a liability insurer (including a self-insured entity), no-fault insurer or workers’ compensation entity, referred to as Applicable Plans (AP), as the identified debtor. Since then, CMS, through a contract with CGI, had been pursuing recovery directly from APs as the identified debtor when an applicable plan reports that it has ongoing responsibility for medicals (ORM) or otherwise notifies CMS of its primary payment responsibility.

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MAP Assignees Settle MSP Class Action Against Ocean Harbor for $5 Million

On January 12, 2018, in the Circuit Court of the 11th Judicial Circuit in and for Miami Dade County, Florida, MSPA Claims 1 filed its motion for approval of a class action settlement against Ocean Harbor Casualty Insurance. The settlement agreement is intended by the parties to fully, finally, and forever resolve, discharge, and settle all claims. The motion indicates that the settlement agreement provides a fair, flexible, speedy, cost-effective, and assured monetary settlement to the class members. Thus, the settlement agreement provides considerable benefit to the class members while avoiding costly litigation of difficult and contentious issues. The parties also indicate that the settlement agreement is a compromise, and shall not be construed as, or deemed to be evidence of admission or concession of liability or wrongdoing on the part of Ocean Harbor with respect to any claim of any fault or liability or wrongdoing or damage whatsoever.





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On Behalf of Our Flagship Family, Wishing You a Wonderful Holiday Season

On behalf of everyone associated with Flagship, I wanted to take this opportunity to thank you, all of our friends, colleagues, and especially our customers, for your trust and confidence in Flagship. It truly means the world to us. To know that after all these years, despite all of the statutory amendments, the compliance challenges, and the regulatory changes, you still count on us for updates, information, training, guidance, and advice on all of your Medicare and Medicaid risk management issues is so very significant for each of us at Flagship.

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New Mexico Federal District Court Finds CMS’ Failure to Clarify if MSAs are Required in Liability Settlements Proving Burdensome in Settlement Process

On November 28, 2017, the United States District Court for the District of New Mexico published its opinion in Silva v. Burwell, concluding that the uncertainty created by CMS’s repeated failure to clarify its position on requiring MSAs in personal injury settlements generally and in specific cases is proving burdensome to the settlement process. The Court further finds this case is not ripe for review because no federal law mandates CMS to decide whether Plaintiff is required to create a MSA. The Court reiterates that just because CMS has not responded to Plaintiff’s requests to clarify whether an MSA is required in personal injury claims is not reason enough for this Court to step in and determine the propriety of its actions. There may be a day when CMS requires the creation of MSA’s in personal injury cases, but that day has not arrived.

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Illinois Federal District Court Finds Surviving Spouse and Adult Children Must Reimburse Medicare $105,000 from Med Mal $250,000 Settlement

illinois Federal Disctrict Court Find Surviving Spouse and Adult Children Must Reimburse Medicare

On November 26, 2017, the United States District Court for the Northern District of Illinois published its opinion on Paraskevas v. Price, concluding that Medicare did not abuse its discretion in finding that the state court settlement order was not on the merits and was therefore not binding on CMS when seeking reimbursement of conditional payments. The Court finds the settlement compensated Plaintiff not only for the wrongful death action, but also the estate’s survivor claims in connection with the medical malpractice claim. Medicare’s decision is affirmed, and the Secretary’s final decision that Plaintiff owes $105,000 plus interest in reimbursement of conditional payments made stands.

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Conditional Payment Compliance Risks for Auto, Liability, No-Fault, and Work Comp Primary Payers

With Medicare still in financial short and long term trouble, the US Department of Health and Human Services (HHS), and its Center for Medicare and Medicaid Services (CMS), have become increasingly more aggressive about making sure Medicare is the secondary payer pre and post settlement in auto, liability, no-fault, and workers compensation claims. As a result, insurers, self insureds, and third party administrators responsible for payment of auto, liability, no-fault, and work comp claims must be aware of and understand their responsibilities under the Medicare Secondary Payer Act (MSP), and be prepared for the multiple risks associated with MSP compliance. What follows is part two of a four-part analysis of risks associated with each of the MSP compliance components: Mandatory Insurer Reporting (MIR), Conditional Payment Resolution (CPR), and Medicare Set Asides (MSA). This second part focuses on CPR compliance risks for auto, liability, no-fault, and work comp primary payers.


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Why YOU Should Be in Control of Your Medicare Compliance

There are two vital rules you need to follow when it comes to managing risk:

  1. Never trust a lawyer.
  2. See Rule #1, especially when that lawyer’s interests are averse to yours.

Tongue-in-cheek aside, these rules make sense from a business perspective.  Yet, when dealing with the matter of compliance to Medicare’s personal injury claims reporting and recovery guidelines, far too many insurance carriers routinely break these rules, often to their detriment.

As an insurance executive, you would never allow a claimant’s lawyer to come in and have free access to your claim data.  Not only are they not experts in the necessary skills to handle your money, they also have a significant conflict of interests: their goal is to get as much money for their client – and, by extension, themselves – as possible.  Read more