Misguided Critique of Covert Surveillance

Norman Groot | September 14, 2009

• Announcing the CI Legal Expert Panel
• Another Twist to Consider—The Allstate Case
• Competition is Fierce—Restrictive Covenants in the Shafron Case
• Internet Use (To Catch Abuse)
• Facebook Litigation Grows
• Proof—Roles of Adjusters and Lawyers in Fidelity Recovery
• Best Practices for Successful Subrogation Recoveries
• State of Securities Class Actions
• Professional Liability and Securities-Related Claims Trends
• Misguided Critique of Covert Surveillance
• Employee Termination—A Risk You Can Manage
• Using Data Analytics to Maximize Company Performance
• Give It Up—Vehicle Fires & Frauds
• Overview of Detection & Investigation Techniques

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Not since the days of George Radwanski—the controversial and outspoken Canadian Privacy Commissioner, who spoke out against the government’s use of video surveillance after the 9-11 attacks—has there been so much controversy over surveillance.

In guidelines published by the Office of the Privacy Commissioner of Canada (OPC) on their website in May, the OPC has stepped on a carrier’s ability to investigate and document claims using covert video surveillance in the private sector.

The published guidelines suggest that organizations are required to consider and document the following prior to undertaking covert surveillance:

1. all alternative measures undertaken to obtain the desired information and the result of those methods;
2. the kind of information that is to be collected through surveillance;
3. the purpose for which the surveillance will be used;
4. the names of the individuals who will view the surveillance;
5. the duration of the surveillance;
6. when and how the surveillance will be disposed of;
7. whether a service agreement exists with any third-party hired to conduct the surveillance;
8. whether the private investigation firm used has met the criteria to be considered an “investigative body” as described in the regulations of PIPEDA;
9. confirmation that the personal information collected by way of surveillance is adequately safeguarded;
10. that images of third parties collected during a surveillance not be used or disclosed and be deleted or depersonalized as soon as practicable.

The first and last “requirements” are what is causing alarm to insurers and private investigators.  These OPC guidelines, by inference, have the result of:

• interfering with an insurer’s right and duty to defend;
• casting aside the best evidence rule and proposes the altering of evidence;
• imposing unreasonable costs on defendants; and
• espousing, as law, unreasonable expectations of privacy in public places.

Who Controls the Investigation Process?

The OPC considers covert surveillance an “extremely privacy-invasive” form of technology that may only be used in the most limited of cases, and only as a tool of last resort.

In our opinion, the OPC’s view of the use of covert surveillance is fundamentally flawed, and should not be followed. During the consultation process, it was submitted by industry stakeholders that covert surveillance is a legitimate investigative tool that often needs to precede more overt investigation methods such as interviews. One example of how OPC’s rational of intrusive is flawed is by asking the question: What is more privacy-invasive? Covert surveillance that the subject is not aware of? Or overt investigations, such as asking questions openly to a subject’s neighbours, associates, physician or accountant?

There is also the issue of cost between overt and covert surveillance and investigation.

An insurer who has grounds for suspecting deceit by a subject should not be required to take more expensive and less effective investigative steps prior to conducting covert surveillance, especially when the information obtained by covert surveillance is publically available.

Unfortunately, the effectiveness of the type of investigation—in obtaining relevant, and often publically available information—appears to be dismissed by the OPC’s decision.

As the insurance industry knows, covert surveillance is conducted for the purpose of confirming or invalidating suspicions of deceit to prevent payments on fraudulent based claims. If the covert surveillance does not validate the suspicion, the investigation often ends. If the covert surveillance confirms a suspicion of deceit, other investigative steps to confront the problem are taken.

It is the insurer who pays for the investigation because there are financial repercussions, this type of surveillance must first meet specifications laid out by the insurer; Covert surveillance is not taken on a blind whim.

Reasonable Expectation of Privacy

Up until 2009, no Canadian court had rejected covert surveillance evidence based on the submission of a right to privacy in public places. Instead, the courts have confirmed the use of covert surveillance, and released a test for the admissibility of such evidence, as seen in the Landolfi v. Fargioni (2006, 79 O.R. (3d) 767, C.A.) case of 2006.

According to the 2006 ruling and to precedence, the insurance industry’s covert surveillance is not to be conducted in private places. Hence, it cannot take place in people’s homes. Instead, the surveillance must be conducted in public places.

Altering Behaviour

Up until 2009, no Canadian court had rejected covert surveillance evidence based on the submission of a right to privacy in public places. Instead, the courts have confirmed the use of covert surveillance, and released a test for the admissibility of such evidence: Landolfi v. Fargioni (2006), 79 O.R. (3d) 767, C.A.).

The OPC’s position that covert surveillance has the same psychological effect as overt surveillance—where a person will curtail his/her behaviour—is self-serving for the OPC’s causes but is generally unsupported by any psychological or empirical studies.

As a matter of general practice, covert surveillance is not brought to a subject’s attention unless and until they are involved in deceit.  Once deceit is established, the stress associated with the surveillance is more properly allocated to the ramifications of the subject’s own behaviour.

The Courts, even in matters such as the right to privacy on social networks such as Facebook, have ruled that the right to privacy is minimal and, often, outweighed by a defendant’s right to defend his case:  Murphy v. Perger, (2007, Carswell, Ont. 9439, S.C.J.).  Without judicial direction on this fundamental issue stating otherwise, we submit the OPC’s Guidelines need not be followed.

Evidence Tampering and the Pixilation Issue

According to the OPC guidelines, when covert surveillance is used and third parties are capturd through this documentation then, “such personal information… should be deleted or depersonalized as soon as is practicable.”

The phrase “as soon as is practicable” leaves the guideline open to interpretation.

As an evidentiary matter, the OPC’s guidelines seem to inferentially advocate tampering with evidence before the evidence is provided to lawyers or the judicial system.

This directly contradicts the court’s test for the admissibility of covert surveillance evidence: That the evidence is relevant and necessary, and reliable in the sense that the video is accurate and a fair representation of the facts, and capable of being verified under oath, as ruled in Landolfi v. Fargioni (2006, 79 O.R. (3d) 767 C.A.).

Even more fundamentally, the Courts have explicitly stated that PIPEDA should not be interpreted as to interfere with the court’s search for the truth: Ferenczy v. MCI Medical Clinics, [2004] O.J. No. 1775, Sup. Ct..

It seems fairly obvious that any pixilation to any covert surveillance conducted for investigative purposes should only be considered after a ruling on the reliability of the evidence is made.

Other Issues with Pixilation

Another problem with deleting and depersonalizing information on covert video surveillance is that the significance of third-party image(s) is not conclusively determined until further investigation.

Also, there are costs involved in covering up digitized information, including:

• the quantity of third parties captured in the surveillance of a subject,
• the length of the surveillance recording, and
• the technology used.

In most cases, the costs of pixilation will at least double the cost of surveillance.

Since there is no prohibition in the OPC guidelines against the disclosure of third-party images in a covert surveillance from a private investigation company to its carrier client, as these images are not made public, there seems to be little reason for the need to alter evidence that may one day be needed at a trial or arbitration.

Insurer Challenges to OPC Jurisdiction

Recently, State Farm Insurance brought an application to the federal court to obtain a ruling as to whether the OPC has jurisdiction over investigations conducted by the insurance industry.

State Farm’s position is that the OPC does not have the jurisdiction to carry out such an investigation, as information collected by an insurer about a third-party claim against an insured person is not information collected, used or disclosed “in the course of commercial activities” within the meaning of section 4 of PIPEDA.

Alternatively or in addition, State Farm’s position is that if investigations for insurers by private investigators does constitute a “commercial activity” within the meaning of PIPEDA, then that legislation is ultra vires (outside the powers) of the Parliament of Canada, as activities carried out for the investigation, defence and/or indemnification of third-party claims by liability insurers, (including the collection of information about the claim, the disclosure or non-disclosure of such information to the claimant, the assertion of rights of non-disclosure and all related matters) are properly within the exclusive legislative competence of the provincial government.

As of this date, there has been no court date set for State Farm’s challenge. While this case does not address issues such as the right to collect evidence in public places and pixilation of evidence after it is collected, it is an interesting development to test the authority of the OPC to regulate the insurance industry.

Going Forward

In proceeding in these risk-averse times, the insurance industry needs to be aware of the following:

• The OPC fulfils an ombudsman role in the financial services sector;
• The OPC Guidelines are only guidelines—they are not law;
• There appears to be little consequence to non-compliance with the OPC’s Guidelines, while insurance fraud is a serious issue and the OPC does not appear willing to bring an application to the Federal Court to test its policy statements against investigations conducted in the public interest;
• If there is a right to privacy in public places, the right is outweighed by an insurer’s right to know as long as their are grounds for the insurer’s investigation prior to ordering covert surveillance;
• If the masking of third-party images needs to take place, it should occur only after the admissibility of the evidence has been ruled upon by a court and before it is shown in a public forum; and
• Insurers are encouraged to review the wording of their vendor agreements, particularize the grounds for investigation in their files and in their letters to investigators, and provide in their own privacy policy statements their reasons for conducting covert surveillance and not tampering with their evidence.

Norman Groot is a litigator with Investigation Counsel Professional Corporation, a law firm that focuses on fraud litigation and investigation law matters. Groot is also counsel to CAPI, the CPIO and CASIU.