Liability insurers are keeping a close eye on the Illinois Supreme Court as the justices consider whether an American International Group Inc. unit must defend medical supply sterilization companies hit with hundreds of claims stemming from emissions permitted by a state regulator.

The case, set for oral arguments Tuesday, tests the question: Who’s on the hook for pollution claims when the company accused of polluting says they were acting with the government’s blessing?

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‘Get It Right’

Carriers generally must defend their policyholders in underlying litigation if there is any potential for coverage. To avoid their duty to defend, the insurers must show an exclusion applies unambiguously.

“Their job is to write policies, so get it right,” said Robert Horkovich, managing shareholder at policyholderside firm Anderson Kill PC. “And if you don’t get it right, you’re going to be penalized and you’re going to have to pay.”

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