Some examples:
The harpy's body isn't falling to the ground, even though she's suffered from severe burns and pierce trauma.

Praxin Douare (Spindleclutch veteran dungeon) isn't targetable by most ranged abilities when he's around the bodies tangled in spider webs. Light and Heavy attacks could reach him but there was only an angle of at most 90° from which ranged abilities (crushing shock for me) could work.

The poor Mzeklok in Rkundzelft was blocked by a pipe and wouldn't go around it. I could easily take him down by myself.
Conclusion: there's an issue with collision above ground level.