Carl, a worker for Nepera Chemical Co. in Harriman, N.Y., claimed he'd slipped and sprained his back during working hours. But the company's personnel department could find no witnesses to the accident. They also thought it unusual that he had not reported the injury at the time it occurred, since a company rule requires that all accidents be reported promptly to supervisors.

When both a company physician and a personal physician said he could do light work, Carl began seeking other medical opinions. He visited five doctors until he found one who would say his back injury had incapacitated him.

Nepera Chemical, as it was required to do by law, filed a worker's compensation claim for Carl, who was now out of work all the time. They also did something many companies don't do: Nepera contested the claim and put the employee under surveillance by the company's security director.

"The doctors had prescribed a regimen for Carl, including bed rest and exercise. Instead, he spent several weeks with his family at a nearby Playboy Club resort," says Patrick Clark, who administers worker's comp claims for Nepera, a $40-million company. "He also worked as a newspaper deliveryman and at a pizza parlor where he did the kind of strenuous work -- lifting and standing for long periods of time -- that he claimed he couldn't do. He was overheard at the pizza parlor saying he intended to buy the business with the worker's compensation settlement he hoped to get. It could have been in the hundreds of thousands," says Clark.

Armed with the testimony of seven witnesses, Nepera took the case to court. "We've investigated eight claims in the past four years," says Patrick Clark. In five of these cases, the claims were dismissed. Three others are still pending. "Smaller companies can't afford unnecessary worker's comp costs," Clark says. "But too often companies look upon these costs as overhead and don't investigate the claims that are false.When a company takes an active interest in its worker's comp program, it discourages employees from looking at worker's comp as just another benefit."

Ron Puleio, vice-president and general manager of Equitable Service Bureau Inc., of Mineola, N.Y., remarks, "Most claimants know someone who has made big money on worker's comp. What makes it so attractice is that it pays all medical expenses and weekly indemnity for as long as you need -- and the boss foots the bill." Equitable specializes in consulting and investigative work for insurance companies and self-insured firms. Eighty-five percent of its cases are worker's comp claims. It recently investigated its 65,000th worker's comp case.

What can small companies do if they suspect a worker's comp claim is false? You may not have the funds to hire your own investigator and probably don't have an in-house security director. So it's crucial that you form a good relationship with your insurance carrier.

The carrier -- a private insurance company or state fund -- offers such special services as engineering and safety inspection and claims investigations. If you or your carrier feel a claim is suspicious, the carrier will be happy to investigate it. Such investigations are included in the cost for your premium, so take advantage of them.

What constitutes a suspicions claim? According to Clark and Puleio, there are some signs to alert you:

* Vague claims. If the employee says he hurt a finger in a stamping machine, he should remember which machine, which department, and the day and time of the injury. The claimant who's vague about details may be fabricating an accident.

* The Monday morning accident. A factory worker claimed he slipped on a piece of paper within moments of arriving for work Monday morning. The result, he said, was a debilitating knee injury. An investigation revealed he hurt his knee during a Sunday afternoon football game.

The early morning accident, and accidents reported several weeks after they supposedly occurred, may also be suspect. Workers sometimes hurt themselves at home, then decide to claim the injury is work-related. "They do this because they don't get the same benefits -- such as lost-time coverage -- from health insurance that they do from worker's comp," explains Puleio.

* The psychological claim. Many workers claim psychological disability as a result of physical injury at work, says Puleio.For example, drivers sometimes claim a car accident has made them afraid to resume driving. Successful claims can provide lifetime indemnity for workers and mean higher annual premiums for employers. Since these claims are often subjective, it's hard for an employer to disprove them. Puleio suggests you establish that you've tried to rehabilitate the employee.

"Rehabilitation would be either vocational redirection or medical management," says Puleio. "If the employee's job is waiting for him or her, or if you can provide another job, make this known. Have a qualified claims representative talk to the employee's psychiatrist and suggest the worker 'test out' his fears by returning to work for a few weeks. Psychiatrists often respond positively to this. If the worker refuses to try rehabilitation, you're more likely to get the claim dismissed."

* The occupational disease claim. Like the psychological overlay, the occupational disease claim is becoming more common, says Puleio. Hearing and lung problems, as well as other diseases, that may be the result of 40 years' work have been held to be compensable.

One company was hit with a disability claim by a six-year employee who was suffering from asbestosis. But during the six years the employee was with the firm, the company had not used asbestos insulation. Puleio investigated and found that the worker's previous employer had used asbestos insulation. The responsible employer was made liable for the claim.

* Back and head injuries. A father and son worked as garbage collectors. Both claimed they hurt their backs during heavy lifting on their jobs. They were out of work and collecting benefits when Puleio's company learned they'd opened a sandwich shop. Puleio's surveillance vehicle, equipped with movie cameras, filmed the men loading hundreds of pounds of equipment onto a flatbed truck outside the sandwich shop. Presented with the evidence, the judge dismissed their claim.

Nausea, dizziness, blurred vision, and headaches are part of the post-concussion syndrome. Surveillance can often determine whether an employee is really suffering from head injuries or is functioning normally.

* Malingering. An employee who finds staying home and collecting worker's comp benefits almost as profitable as working may extend unnecessarily his recuperation period. Patrick Clark deals with this problem by staying in constant contact with the doctors of employees who are at home recuperating from work-related injuries. This way, he is always informed of their progress.

One firm reduced malingering by 98% in a year by hiring a company nurse. The nurse maintained regular contact with the disabled workers' doctors. She also asked the employees to come to the plant to have their dressings changed every few days to judge whether they were ready to return to work. Often, she'd suggest light duty for workers until they fully recovered.

Regular monitoring of worker's comp claims pays off. It discourages employees from filing false claims. It can help you recognize accident patterns and areas where safety rules are not being followed. Ultimately, it can reduce both the number of accidents and the amount of your insurance premiums.