A man who had a tumour believed to be malignant removed on expert medical advice – but discovered he did not have cancer after the surgery – has won a dispute over a claim under his trauma policy with life insurer OnePath.

The Australian Financial Complaints Authority (AFCA) says the distinction between the man’s situation and a person confirmed to have cancer before surgery is “so fine” it would be unfair for the insurer to refuse to pay a benefit.

At the date of his surgery the man had not been formerly diagnosed with any kind of cancer but was told that he probably did have cancer and was “treated as if he did,” AFCA says.

“Fairness requires the insurer to pay 80% of the benefit,” the authority says, adding that the reasonable expectations of a payout was “an important consideration in fairness”.

The man was found to have a mass in his testicle. It was feared to be malignant and the testicle was removed. After the surgery, the growth was found to be a non-cancerous tumour.

OnePath’s trauma policy terms stated it would pay 20% of the full trauma benefit for carcinoma “in situ” and the 80% balance if removal of the testicle was required to arrest the spread of malignancy.

AFCA says this was a “striking feature of this case which requires careful consideration” as most of the benefit was paid for surgery.

It decided OnePath should grant the payout “even though it is not required to pay a benefit under the terms of the policy”, as the man’s circumstances were very similar to that of a person diagnosed with carcinoma in situ who has a testicle removed.

“A reasonable person would expect to be covered for the removal of a testicle to arrest the spread of malignancy, even when it is later established that there was no malignancy to begin with.”

Click here to see the full ruling.