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

The Australian Financial Complaints Authority (AFCA) says the distinction between the man’s situation and a person confirmed to definitely 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 likely had cancer and was “treated as if he did,” AFCA says.

“Fairness requires the insurer to pay 80% of the benefit.”

AFCA says the “reasonable expectations of the parties” was “an important consideration in fairness.”

The man, who held a trauma insurance policy with OnePath Life, was found to have a mass in his testicle. Medical experts feared it to be malignant and the testicle was removed. After the surgery, testing which was unable to be performed earlier revealed the growth was actually a non-cancerous tumour.

The man then claimed on his trauma policy, but OnePath rejected the claim.

The policy terms stated it paid 20% of the full trauma benefit for carcinoma “in situ” and the balance – 80% – if removal of the testicle was required to stop 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.

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

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