Recovery of paid benefits is a “significant step” and “only available to an insurer in extraordinary circumstances”, the financial services ombudsman says in a dispute ruling.

AIG tried to recover $31,766 in income protection benefits from an injured worker, but the Australian Financial Complaints Authority says the recipient need not repay the money and should instead receive $1000 compensation after the insurer engaged debt collectors.

The claimant, a delivery driver, held IP cover under his employer’s group policy when in June 2023 he was diagnosed with Paget-Schroetter disease, causing deep vein thrombosis in an arm. He had surgery, stopped work in August 2023 and started receiving weekly benefits.

AIG said it later learnt that in March 2024 the man attended a hospital appointment where a surgeon told him he could return to work at full capacity.

The claimant did not tell his GP this, so the doctor continued to certify him as unfit for work, then later for modified duties pending a surgical review.

AIG submitted a report from the GP dated May last year stating he would have certified the man as fit to work from March 2024 had he known of the surgeon’s opinion.

The claimant failed to attend follow-up hospital appointments, and the insurer said that meant he was no longer under the regular care of his treating specialist.

The insured contended he told his GP about the March 2024 appointment but a specialist had told him he continued to have restrictions.

Personal circumstances, including his mother’s death, affected his ability to attend all hospital appointments, and the hospital cancelled some of them.

He said his employment was terminated in March 2024 because he failed a medical assessment and could not resume full pre-injury duties.

The ombudsman says the insurer had to clearly establish a proper basis to deny, limit or recover benefits. Instead, there were “significant evidentiary gaps” in information provided to establish the reasonableness of its decision to seek recovery.

A certifying doctor changing their mind is not a proper basis for recovery, and there is no evidence of fraud or dishonesty, AFCA says.

Read the ruling here.