A mechanic being paid disability benefits who said his business was able to keep earning close to $200,000 annually because his wife, friends and family worked as unpaid volunteers after he was injured has lost a dispute with his insurer, which filmed him working on cars and caravans and lifting heavy items.

The self-employed mechanic worked as a sole trader and broke his left arm in late 2017 and also had hernia surgery in March 2019.

He made an income protection claim under a policy with AIA Australia in which he said he was totally disabled. AIA paid him total disability benefits until May 2019, when it said surveillance showed he was no longer unable to work.

The mechanic had told the Australian Financial Complaints Authority (AFCA) that AIA should still pay him benefits as his wife carried out much of the labour for the business under his instruction and income was mostly from selling parts and assets rather mechanical work.

AFCA sided with the insurer, saying this explanation was “not convincing” and business records and surveillance indicated he was not totally disabled in the last half of 2019.

“The complainant’s wife, his friends and family are not qualified mechanics,” AFCA said.

“The business continued to perform after the left arm injury in much the same way as it was before the injury,” the ruling states. “He is not entitled to total disability benefits as a result of his left arm and hernia conditions in that period.”

AIA provided footage showing the mechanic working unassisted on a Toyota Hilux for most of the day in August 2019, lifting heavy parts and using his left arm extensively. Later that month, he was seen moving various vehicles around and working on a caravan which involved bending, leaning, cleaning, fitting and testing a pneumatic door.

AIA declared him no longer disabled for work by his injury and also said financial records did not show a significant change to the income of the car repair business.

The mechanic said his wife carried out repairs under his direction and guidance and his friends and family helped him by working as unpaid volunteers in his business. The focus of the business shifted from motor repairs to selling parts, some of which was recorded as "labour" in the books.

“That explanation is not convincing,” AFCA said. “The complainant’s wife had other work. She does not appear to be doing any mechanical work in any of the surveillance video obtained by the insurer.”

Tax returns showed total business income before expenses of $193,182 in the 2017/2018 financial year, little changed from the $216,153 income of the previous year despite the arm being broken. Monthly profit and loss statements for the 2018/19 year were broadly consistent again and showed significant income, including from "labour".

AFCA said this revealed the business continued to earn significant income during the claim.

“I am not satisfied, based on the records before AFCA, that the ‘labour’ showing in the profit and loss statements is anything other than income for work performed in the business,”

The mechanic was also seen inspecting and possibly working on a large yellow vehicle in October 2019, lying on his back to inspect underneath the vehicle, and lifting and carrying apparently heavy items in December, moving vehicles and tools around his shed.

“I am satisfied that the complainant was in fact working over the period covered by the surveillance,” the AFCA ombudsman said.

“It was fair for the insurer to determine, based on the financial records and surveillance, that the complainant was not totally disabled for work by his left arm or hernia injuries from 1 June 2019 to December 2019. The insurer is not required to pay total disability benefits for that period.”

The AIA policy provided benefits for total disability benefit if the insured was not working at all because of disability and for partial disability if the insured was working at less than full capacity because of disability.

The mechanic had lodged a separate dispute alleging disability arising out of a diagnosis of rheumatoid arthritis and AFCA said he could file a new claim for partial disability benefits for the last half of 2019 with AIA, if he chose to.

See the full ruling here.