Insurer AIA demands injured mechanic repays nearly $250k

Geoff Bagnall was left on a sickness benefit, writes Rob Stock, after an insurer claimed he earned tens of thousands of dollars while receiving income protection payments.

Geoff Bagnall is facing a demand for nearly $250,000 from his insurer, AIA. Bagnall cannot work as an automotive mechanic as a result of damage to tendons in his hand, and was getting by on $2000-a-month payments from AIA on a ‘‘Risk Protection Plan’’ income protection insurance policy he bought from Sovereign, which AIA bought in 2017 in a $4.15 billion deal.

Despite accepting he is permanently disabled, AIA claims Bagnall failed to disclose tens of thousands of dollars of what AIA believed to be income Bagnall earned while on claim since 2013.

AIA claims Bagnall breached his duty of ‘‘utmost good faith’’ to it, entitling itto tear up the policy, and demand repayment of $244,039.28 paid to Bagnall.

But Bagnall, from Snells Beach near Walworth, says the insurer is wrong, and has taken a complaint to the Insurance and Financial Services Ombudsman, with the help of insurance lawyer Tim Gunn.

‘‘They just think I have been working and making a lot of money, and presented me with a bill for a quarter of a million dollars, and no more income,’’ Bagnall says.

‘‘They say I have to pay back what I have got off them over the years.’’

But Bagnall says he thought he and his accountant were providing everything AIA needed, and it did not query the financial information relating to two companies he owned that his accountant supplied each year directly to the insurer.

‘‘I’ve put all my cards on the table,’’ he says.

One of the companies owns the premises he lives in, and a small commercial premises in Auckland one of his sons uses as a workshop. The other is his now-defunct car repair business, he says.

Though AIA does not accept Bagnall’s explanations for transactions it has identified, it has not started a legal process to enforce its repayment demand, and will not until Bagnall’s complaint to the ombudsman has been decided. AIA says it ‘‘does not comment on specific claims for privacy reasons’’.

‘‘All complaints received by AIA go through a vigorous and robust internal review process, including consideration by our complaints committee. If a resolution cannot be reached, customers may refer their complaint to the Insurance and Financial Services Ombudsman.’’

If he loses, Bagnall says he would have to sell the Auckland workshop to keep a roof over his head. He says AIA’s move has plunged him into hardship.

AIA made its last payment in January last year. Since then, Bagnall says, he has been surviving on a sickness benefit, and emergency grants from Work and Income. ‘‘That’s what I live on now, and friends help me out. That’s pretty much it.’’

AIA audited Bagnall’s claim after getting a form from his doctor, which Gunn says raised a suspicion with AIA that he had

‘‘He’s ruined. I can hardly talk to him without him crying. It’s just a case of me having to hug the man a number of times because he’s devastated.’’ Tim Gunn

been working. Bagnall was not barred from doing some work despite being on claim, Gunn says, but AIA was entitled to reduce the amount it paid him if he received income.

Gunn says had AIA told him the information he was providing was not adequate, he would have given the insurer what it wanted, Gunn says.

‘‘AIA did not request any further financial information for any of the years in issue,’’ he says.

‘‘The evidence shows that AIA completed annual financial reviews during the relevant period. If the amounts in issue amount to income, which is denied, then it is AIA’s failure to adequately assess Mr Bagnall’s financial records rather than any misrepresentation by Mr Bagnall.’’

Gunn says Bagnall is not financially sophisticated, or literate, and AIA should

have identified this. ‘‘He fundamentally didn’t understand any of the obligations placed upon him,’’ Gunn says.

Any serious face-to-face interaction between the insurer and Bagnall would have made it patently clear he did not understand what was going on, Gunn says.

‘‘Any engagement with him, person to person ... would have resolved, and solved this problem. No-one sat him down and prescriptively discussed what the requirements were.’’

Cancelling the policy was disproportionately harsh, and demanding the money back was inequitable, because of the insurers’ failures, he says.

‘‘It’s a wholly disproportionate outcome,’’ making Bagnall’s plight an issue of national importance, Gunn says.

He hopes Government progress towards reforming insurance law will require proportionate responses from insurers to innocent mistakes made by policyholders.

Bagnall had to fight hard to get on claim on the policy he bought in 1997. He made a claim in 1999 after damage to ligaments in his left leg and ankle, and stayed on claim until 2005, when Sovereign decided he was fit to return to work.

But the following year further health problems – stress, chronic pain syndrome and damage to tendons in his left hand – resulted in another claim, which AIA declined.

Bagnall complained to the ombudsman, which upheld his claim in 2008, requiring AIA to pay him nearly $40,000, and put him on claim. Bagnall remained on claim until 2020, when AIA began its audit.

Gunn has fought AIA successfully before, in the case of Northland man Bevan Waters.

Gunn says after that legal tussle, AIA invited him in to talk to executives about how insurers’ claims processes can damage people’s mental health. The dispute between AIA and Bagnall has had a terrible emotional impact, he says.

‘‘He’s ruined. I can hardly talk to him without him crying. It’s just a case of me having to hug the man a number of times because he’s devastated.’’