SINGAPORE - An elderly Indonesian couple won a marathon lawsuit against insurer AIA on Friday (Dec 29) over a fake US$5.06 million (S$6.8 million) policy they had bought from a rogue AIA top agent.

The plaintiffs, Mr Ong Han Ling and his wife Enny Ariandini Pramana, sued AIA in 2012 for the fraudulent acts committed by Sally Low.

On Friday, the High Court also dismissed the AIA's counter-claim that the Ongs had conspired with Low to defraud AIA. It found the insurer vicariously liable for Low's fraud and awarded the couple a sum of $1,597,250.69 with interest.

In coming to its decision, the High Court examined the insurance business structure of AIA, where agents form an integral part of the company's business model.

It 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 the court found that there was a close connection between Low's fraud and her relationship with AIA. Thus, the AIA defendants were vicariously liable for Low's fraud and the plaintiffs could recover their losses from the insurer.

The High Court also noted that the life insurance industry was regulated in a manner which expected companies like AIA to take responsibility for the management of its agents.

The Ongs' claim against Motion Insurance Agency, which was Low's agency manager, was dismissed.

The High Court held that there was no special relationship between Motion and Low that was capable of giving rise to vicarious liability. Motion and Low did not have a contractual relationship. Both worked for and were remunerated by AIA and it held that Motion did not owe a duty of care to Low.

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 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, the agent 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 counter-claimed that the fake policy was part of a ploy cooked up by Mr Ong for both of them to defraud AIA for financial gains to be shared between them.

After many twists and turns in the saga, Low, who had faced a total of 21 charges and engaged a total of seven lawyers, pleaded guilty and was sentenced to eight years' jail in May last year. The Ongs recovered some of their money from Low and sued AIA for the remainder.