AIG has won a claim dispute over a $25,000 policy benefit sought by a man who lost the tip of one of his thumbs during a circular saw accident in May.

The man was insured under an AIG group accident policy and the insurer accepted his claim and paid benefits under two policy sections.

However, the man went to the Australian Financial Complaints Authority (AFCA) seeking a further $25,000 benefit under the policy’s “event 8”, which provided cover for permanent total loss of use of one limb.

AIG argued he had not suffered a loss of limb within the meaning of the policy. AFCA agreed, saying the man would only have suffered a total loss of a "limb" if he had lost either a part of his arm between his shoulder and wrist, or an entire hand below the wrist.

“While I am sympathetic the complainant has lost the tip of his thumb, I am satisfied he has not established an entitlement to the event 8 policy benefit. It follows that AIG is entitled to decline his event 8 claim,” the AFCA ombudsman said.

The policy defined "limb" as any part of the arm between the shoulder and wrist, any part of the leg between the hip and the ankle and the entire hand below the wrist or the entire foot below the ankle. It defined "total loss" as “an insured body part or limb, the physical severance or entire loss of the use”.

Event 8 was specifically limited to the loss of a "limb" and did not make any reference to loss of "an insured body part", AFCA said.

“While there is no dispute the complainant has suffered a permanent total loss of the tip of one of his thumbs, and this may constitute ‘an insured body part’, this does not qualify him for cover under the policy’s event 8,” the AFCA ruling says.

Click here for the full ruling.