Thank you for your post - good to hear some reassuring news. Yours is similar to Richard (sporeguy) from Singapore - somewhere on this forum - who didn't have any issues either when claiming against an identical policy definition to ours.
I would suspect yours is very similar to Richard's and ours. If its not asking too much, would you be able to post the description of the definition of 'benign brain tumour' in your policy? We really can't understand why our insurer is holding out with such a feeble defence.
I think sometimes insurers want to see how far they can push you before you give in. Unfortunately we seem to be copping that and the process takes an extraordinarily long time to resolve.
Fortunately for them insurers in Australia are exempt from the legal concept of 'bad faith' that other businesses are subject to. Even after the Act was revised last year, that portion was deferred for further review in the new parliament (after September 2013 elections).