Smile! Colorado May Shut Down Insurers' Candid Camera

(MoneyWatch)  The battle between those who say they're infirm, injured and disabled -- and the insurers who don't believe them -- is getting fierce. One state in particular is taking the employee's side.

Colorado's House Judiciary Committee has approved a bill that would prohibit employers or insurers from conducting surveillance, including videos, of employees who have filed a workers' compensation claim, unless there is "a reasonable basis to suspect that the employee has committed fraud." According to Business Insurance, companies who break the proposed law face a $1,000-a-day fine.

The Colorado movement to curb insurers comes at a time when carriers are cracking down on employees who take extended sick leave or file disability claims. SmartMoney reports that an insurance case manager called a Washington state woman who has breast cancer at 7 a.m. to ask probing questions about her health, such as "Did she feel well enough to exercise?" The magazine says that insurers are cutting back coverage where possible and "putting employee complaints under a microscope."

But insurers also have an argument. Workers' compensation payments, along with no-fault medical fraud costs are "spiraling out of control," according to the New York Insurance Association. Among the NYIA's concerns are lawyers who hire "runners" to set up fake accidents, and then send the "injured" for medical treatment at prearranged doctors and chiropractors who split inflated fees. Over the last three years, suspected fraud cases have jumped 33 percent in New York State.

Not allowing a convincing video of a worker who claims to have a bad back but is lifting weights in the back yard crimps the insurer's case, of course. Even cops now carry cameras on the front of their patrol cars. But some employees tell tales on themselves. A Canadian woman went out on disability claiming she was "clinically depressed," but posted photos of herself in a bikini vacationing on a beach on her own website.