If create a landscape for example with default settings, and change the LODDistance Factor to 3.0 for best view, when you move over the terrain this work fine, but if go far in vertical is like if you are all time at 50 m the LOD.
In vertial the LOD Sphere is the same at 50m and 1,000,000,000m in vertical.
Look in wireframe mode.
The LODs only are generated in a horizontal plane (x,y) not work with z ?