Report from fraud combat zone.

This private eyes cadre is fighting insurance ripoffs with high tech, tenacity

Private investigator Doug Baldwin was working on a case involving the theft from a Southern California warehouse of oriental rugs insured for $1 million when he found the lead he needed.

By putting the key words "oriental rugs" and "theft" into a computer to search newspapers nationwide, Baldwin found out that the same businessman who had filed the insurance claim had had some bad luck in four other U.S. cities with stolen oriental rugs - while doing business under different names.

Baldwin gave the evidence to the insurance company for which he was working, which informed the businessman's attorney his claim wasn't going to be paid.

"We say, 'We have evidence that you've been filing these claims all around the country,'" says Baldwin, owner of Doug Baldwin Investigations in Silverlake. "The other attorney is saying, 'You'll never prove that claim.'"

But in the end, the attorney for the insurance policyholder agreed to settle for $150,000 -- $850,000 less than he was insured for in this case.

There's a lot of work these days for insurance investigators, says Tim Kett, spokesman for the National Insurance Crime Bureau in Chicago.

Although no one really knows how much fraud is out there nationwide, it is estimated that between 10 percent and 40 percent of all insurance claims are fraudulent, Kett said. That translates into $50 billion to $100 billion worth of claims filed last year, he said And all indications are that fraud is on the increase.

Pat Kissane, secretary of the Southern California Fraud Investigators Association, a group of investigators who probe fraud for insurance companies, said the number of fraud investigators seems to grow each year.

For the past few years, membership has been growing at about 100 to 150 a year, she said.

Currently, there are about 800 members, who are investigators who work for themselves, insurance companies or for government agencies, such as the state Department of Insurance, Kissane said. About half of the members work for private insurers and half for public agencies, she added.

For 22 years Ty Hutchison worked for the Los Angeles Police Department. When he retired, he was a Class II sergeant and had worked as a detective in the vice squad, the elite Metro Squad and finally as a detective in the Internal Affairs Division.

He opened his own private investigation agency, T.B. Hutchison & Associates, about eight years ago with only himself and his wife as employees, and now has a staff of 12, he said. Most of his business is investigating auto accident fraud and workers' comp fraud for major insurers, he said.

Hutchison says he is busy these days investigating so-called "swoop and squat" scams in which an insured driver is set up to rear-end another car, he said. The scam artists will usually pick an elderly driver or the driver of a luxury car, like a Mercedes, as a victim, he says. Well-insured commercial trucks are also common victims.

The way it works is the scam artist maneuvers in front of the victim and slows or stops till the victim rear-ends the car. Sometimes, there will be a lead car in front of the one that is hit, which will slow or turn or otherwise create an excuse for the sudden stop, Hutchison explains. Sometimes, there is another car, with the job of driving alongside or "boxing in" the victim, who cannot escape the accident.

Typically, the car that is rear-ended has three or four passengers in it, who all claim back pain or neck pain or other types of "soft tissue" injuries which are difficult to prove, Hutchison says.

"The liability ranges from $10,000 to $15,000 a head," he says. "If you've got four to five people in a car, you're talking $40,000 to $60,000."

Hutchison gets most claims dropped by interviewing the claimants in the car.

"Generally, it involves asking a battery of questions designed to invoke discrepancies," he says. "If the holes in the claimants' stories are big enough, the attorney generally agrees to drop the claim".

Dan Jones, owner of D.Y. Jones & Associates, a Glendale-based agency with 60 employees, says he also probes suspicious accident claims with a battery of questions.

Jones' set of questions is 22 pages long and asks everything "from where they're going on their trip to post accident and what medical treatment they received," Jones says. If it's a staged accident, the passengers "may give three or four different statements about where they were going that day," he says.

Not all auto fraud cases these days are swoop and squats.

Jones handled a recent case in which a woman with two children was in a car parked at the curb near a parking lot. When an insured driver was making a right turn into the lot, the woman pulled out and hit the car, Jones said.

The claimant claimed "she was just parked there" and the insured driver hit her, Jones says. But her attorney agreed to drop the case after Jones' detectives found a witness who saw the woman pull out. Detectives also found out the woman had a fake driver's license and a fake social security number, Jones says.

Another recent claim was dropped when Jones' investigators were able to prove there were only two passengers in the claimant's car, when the claimant said there were four.

"One of the people supposed to be in the car was in custody at the time," Jones says. "He was in jail."

Hutchison, too, does a lot of surveillance of workers' comp claimants these days. One of his favorite ways of getting a claim thrown out is by filming the claimant, who is claiming a physical injury, playing sports.

Hutchison says he filmed that workers' comp claimant doing a bicycle kick, which is when the soccer player kicks the ball backwards and over his head. In a bicycle kick, "you end up flat on your back when you're done," he says, chuckling. That particular soccer star was claiming a back injury, he says.

Mostly, surveillance is boring, Hutchison confides. "But I get kind of excited when I get something like that on film."