Gotcha: persistence pays off for insurance fraud investigators.

In the world of surveillance, patience is key Consider the case of the chief executive officer drawing nearly $15,000 a month in disability after suffering a heart attack and falling to the floor, severely injuring her back. A once-avid runner, she was so disabled that doctors said she couldn't drive.

But her insurer grew suspicious and enlisted L&W Investigations Inc. to check things out. One day, L&W's investigator sat in his car for hours watching the woman's house and saw no activity. Suddenly, at 6 a.m., the claimant, dressed in sweats and carrying an athletic bag, strode out to her car and drove off.

The investigator followed her to a gym and then inside. He paid for a one-day guest membership and took the neighboring treadmill as the claimant worked out. A camera hidden in the investigator's gym bag recorded everything.

"The funniest part was our investigator said he almost had a heart attack because he wasn't used to running 45 minutes on a treadmill," said Neal Lyons, chief executive officer and chairman of L&W, a private investigations firm specializing in insurance investigations and surveillance.

The tale continues. The woman left the gym, trailed by the investigator, who kept taping. The subject then indulged in a two-hour tryst with a man, with whom she was having an affair.

It gets worse: The woman's husband was also her attorney. When the insurer told him that it was denying his client's claim and he protested, the carrier invited him in and showed him the tape. End of story. End of marriage.

Some 40% of the claims that L&W investigates turn out, like this one, to show elements of fraud, Lyons said. But even when investigators clearly have the goods on someone, he noted, there's no guarantee the insurer will prevail in litigation.

"Defense lawyers are finding new and more innovative ways to get evidence thrown out, to get evidence questioned, to give an excuse for what we might perceive as fraudulent activity," Lyons said.

For example, during a two-day surveillance, a woman claiming a back injury is videotaped carrying bags of heavy groceries from a supermarket. L&W advises the insurer to continue the surveillance to establish a pattern. But the insurer rejects that, insisting there's enough evidence to go to court. There, "the lawyer will admit his client did lift groceries that day but tells the judge, 'You should have seen her for the next three weeks!'" Lyons said. "We're seeing an awful lot of that."

In response, L&W's investigators are trained to support everything they do so it holds up in court, he said. Also, to preserve the chain of evidence, the firm will hand-deliver reports to clients to counter any argument that videos were altered in transit by scanners. It can do this because it has 88 investigators across the country who work out of 25 satellite offices.

The 3-year-old company, with main offices in Laguna Hills, Calif., and Westborough, Mass., expects to double in size by 2007. Fueling this growth is the fact that insurance fraud costs Americans $29 billion annually, reports the Insurance Information Institute.

"This is pretty serious stuff," Lyons said of his firm's work. "If you do a good job, you can save a fortune for these insurance companies--and you and me in premiums."