AIG, Medical Sterilization Firms Clash Over Pollution Exclusion

Two medical sterilization companies and an American International Group Inc. unit sparred in Illinois’ top court over whether a pollution exclusion bars insurance coverage for defense costs in litigation over ethylene oxide emissions authorized by a state regulator.

The justices during oral arguments Tuesday probed the parties about whether the case involved only defense costs or could have a wider reach.

An insurer’s duty to defend is based on the potential for indemnity coverage, Illinois Supreme Court Justice Mary Jane Theis said, noting that a decision requiring the AIG unit to defend the sterilization companies could impact insurers’ duty to ...