10/15/2013

Is a Picture Worth a Thousand Words, Claims, or Lawsuits?

Occasionally, new technology emerges that seems to rest on the line between being a positive or negative advancement in fraud prevention.

By Brian P. Henry

The past century has witnessed an explosion of technological advances scarcely seen before in human history. From the dawn of time to 1903, we were grounded by the bonds of Earth; only 66 years later, mankind left footprints on the moon. Technological advances seem to occur even faster in the 21st century. A new version of a smartphone appears on the shelf every six months with more technology contained in a small aluminum shell than existed in the entire Apollo space program.

Much of this technology has made combating insurance fraud easier. For instance, the Internet makes cursory investigations of claimants and witnesses much easier and certainly less expensive. Data obtained from geotagging can help investigators confirm or refute a person’s claim by looking at where they were at a particular time. Even certain high-end computer software can analyze electronic data more efficiently, searching for patterns in the data stream and drawing conclusions from it.

Occasionally, however, new technology emerges that seems to rest on the line between being a positive or negative advancement. Simply put, not all technological advancements are good advancements, as in the case of license plate scanner technology.

License plate scanners or readers are a relatively new device primarily being utilized by law enforcement personnel across the county. Such scanners or readers are essentially a mounted automatic camera that takes digital pictures of vehicles’ license plates. The scanners are typically positioned somewhere in police cars, taking digital pictures as officers patrol. However, they also can be positioned on bridges, buildings, or any fixed location.

These scanners take thousands—if not tens of thousands—of pictures every day in any given location. The scans are uploaded to a database and analyzed to determine if the registered drivers have any outstanding warrants, outdated registrations, or other law enforcement issues. Every so often, the computer inside a patrol car sounds an alarm, and a license plate found in the database appears on a screen to alert the officer to any concerns related to that plate. Due to the digital nature of the technology, these devices can scan every license plate in a given area or in an intersection in mere minutes over and over throughout the day.

The benefits to law enforcement from this technology are obvious. Photographing, downloading, and assessing the position of licensed vehicles in a very short time frame can help ensure that vehicles on the road have proper registration, and they can assist in tracking down fleeing suspects and even locating abducted children or missing adults.

As is often the case with new law enforcement “toys,” there is a side benefit to the insurance industry. If an insurer can gain access to the information recorded by law enforcement, it can use that information to combat fraudulent claims. For example, if an insured claims to be in one location when an accident occurred, license plate scanner data may assist in confirming or refuting that claim. Moving license plates from one vehicle to another for the purpose of defrauding an insurer also may be identified in certain circumstances. And a scan of the plate on a vehicle reported as stolen could help uncover a concerted effort to commit insurance fraud, depending on the relationship of the occupants of the vehicle to the insured. Theoretically, new technology like this that assists law enforcement in its duties and helps the insurance industry in battling fraudulent claims must be beneficial and a positive advancement, right?

Perhaps not. A July report issued by the American Civil Liberties Union (ACLU) strongly criticized the use of license plate scanners by law enforcement due to invasion of privacy concerns and the impact the obtainment and retention of the digital data has on innocent drivers. The general refrain of “Big Brother is watching” underlies these criticisms, with the primary challenge being to the unrestricted retention and use of the data obtained.

While the right of privacy is certainly worth protecting, perhaps more distressing is the inconsistency with which different law enforcement agencies retain, control, and distribute the data obtained. For example, the ACLU report reflected that the Minnesota State Patrol purges any data it obtains within 48 hours of obtainment, and it has fewer than 20,000 license plate readings on file.

Conversely, one relatively small town in California has 4.7 million license plate scans on file with no established policy whatsoever for erasing them. More troubling, because the use of license plate scanners is a function of state and local government, there is simply no nationwide standard for the distribution of data from the scanners to third-parties like insurance carriers, complicating the obtainment and usage of the data.

Ramifications stemming from the use of license plate scanner technology are now being seen in reported cases, although almost exclusively in the criminal context. For example, a Georgia appellate court recently considered a defendant’s motion to suppress all evidence from a traffic stop that was initiated after the police received an alert from a license plate reader system in a patrol car on the grounds that the system did not meet standards for admissibility imposed for radar detectors. [See Hernandez-Lopez v. State of Georgia (2013)] The court denied the motion, holding that unlike radar detectors, which produce data proving commission of the offense at issue, license plate scanners merely provide law enforcement with “reasonable, articulable suspicion to justify an investigatory stop.” 

In another criminal case, a defendant charged with criminal possession of a weapon moved to suppress all evidence stemming from a traffic stop prompted by data received from license plate scanner technology. [See People v. Davilla, (2010)] In Davilla, the court undertook an extensive review of an image-producing technology system used by the New York City Police Department to identify vehicles by their license plates. The court noted that the system could automatically photograph license plates at the rate of hundreds per minute, at which point a computer would compare the information obtained to a database containing a list of license plates corresponding to cars that had been reported stolen, had lapsed registration or insurance coverage, or other similar violations of law. Despite the NYPD failing to adhere to its own two-step protocol of updating the database and confirming the accuracy of the information, the Davilla court denied the defendant’s motion to suppress, holding that the protocol represented mere recommendations that could be implemented, not legal requirements.

Despite these challenges, the use of license plate scanner technology by law enforcement personnel is on the rise. The question becomes whether, and to what degree, the insurance industry can capitalize on the technology or will it suffer negative consequences from the use of the technology. Some questions to consider are obvious; others somewhat less so. For example, how are insurers to go about obtaining the data in the first place? Are Freedom of Information Act requests to be issued to law enforcement agencies for every claim involving fraud or dishonesty? If not, how are insurers to decide which claims warrant obtainment of license plate scanner data and which claims do not?

Also, some law enforcement agencies, like the Minnesota State Patrol referenced above, purge license plate scanner data relatively quickly after obtaining it. In those jurisdictions, it would be next to impossible for an insurer to obtain the information unless it has a systematic, near-daily process of obtaining all data for a particular geographic area.

Such a solution seems cumbersome and likely very expensive. Selective obtainment of data seems more practical, but how can that be accomplished? Should insurers now incorporate requests for license plate scanner data from local law enforcement into their standard operating procedures when opening new claims? To what steps must insurers go to ensure the reliability of the equipment being used by law enforcement personnel? These questions and many others present a myriad of concerns associated with the insurance industry adopting the use of this technological advancement.

Finally, aside from the sheer logistical challenges associated with obtaining and utilizing license plate scanner data, there are potential negative consequences that could result from the use of the data. For example, to what degree does an insurance company’s obtainment of license plate scanner data constitute an invasion of an insured’s privacy? Must consent be obtained from an insured before the insurer can request the data from law enforcement? Perhaps most importantly, are bad-faith concerns implicated if denials are based, in whole or in part, on the fruits of license plate scanner data obtained from law enforcement personnel who did not adhere to their own protocols in collecting the data? As these concerns suggest, the potential negative ramifications are in serious juxtaposition to the benefits offered by the scanner data.

Eventually these issues will crystallize, and the rights and responsibilities of those utilizing license plate scanner data, or hoping to use the data, will become clearer. In the meantime, however, insurers and legal practitioners would be wise to consider all the pros and cons of license plate scanner technology before incorporating the technology into their standard operating practices.   

 



Brian P. Henry is a partner at CLM Member Firm Smith, Rolfes, & Skavdahl. He has been a CLM and Insurance Fraud Committee member since 2013 and can be reached at bhenry@smithrolfes.com.

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