An elderly Indonesian couple has won a marathon legal suit against insurer AIA over a fake US$5.06 million (S$6.8 million) policy sold to them by a rogue AIA top agent.

Plaintiffs Ong Han Ling, 79, and his wife Enny Ariandini Pramana, 78, had sued AIA in 2012 for the fraud by insurance agent Sally Low.

Yesterday, the High Court also dismissed AIA's counterclaim that the Ongs had conspired with Low to defraud the insurer. It found AIA vicariously liable for the fraud and awarded the couple $1,597,250.69 with interest.

The court found that in the present case, the relationship between Low and AIA was capable of giving rise to vicarious liability, which refers to insurers' responsibility for the conduct of their agents. This is because there was a close connection between Low's fraud and her relationship with AIA, it said.

The court noted that the life insurance industry was regulated in a manner which expected firms like AIA to take responsibility for the management of its agents like Low.

An insurance practitioner said: "Insurers have a duty to ensure that their agents are properly trained, and are fit and proper at all times."

On the issue of negligence, the High Court held that AIA had breached its duty of care to the Ongs by failing to prove that it had a system in place to follow up on its instructions to its agents.

In particular, refund cheques of sizeable amounts meant for the Ongs were unpresented because Low did not pass them on to the Ongs. Despite the breaches, the High Court found that the Ongs could not prove that AIA's breaches led to their loss.

The Ongs' claim against Motion Insurance Agency, Low's agency manager, was dismissed as Motion and Low did not have a contractual relationship. Both worked for and were remunerated by AIA and the court held that Motion did not owe a duty of care to Low.

When contacted, Mr Ong said: "My wife and I are vindicated by the judgment. We should be happily retired but have spent 10 years fighting against AIA, and it has been very tiring for us. The judgment on conspiracy has cleared our name."

AIA Singapore said: "This has been a very exceptional case and AIA is relieved that most of the Ongs' claims against AIA have been dismissed. AIA will study the grounds of decision with our lawyers to assess the next course of action. AIA continues to regard the interests of our policyholders as paramount."

The long-running legal saga began in late 2002 when Mr Ong was sold a fake five-year AIA Thank You policy by Low. Mr Ong said that after he remitted the premium, Low, without his knowledge or consent, used the funds to buy six AIA policies for him, his wife and their daughter. Midway through the tenure of the Thank You policy, she deceived him into giving the insurance proceeds from three of the unauthorised policies to her. Her scheme came to light in 2008, after Mr Ong learnt from AIA that the Thank You policy was bogus. He sued her for damages totalling US$2.25 million and $2.99 million.

Low was jailed for eight years in May last year. The Ongs recovered some of their money from Low, and sued AIA for the remainder.