NEW YORK—Former American International Group Inc. Chairman and CEO Maurice R. Greenberg plans to appeal a New York Supreme Court justice's decision holding him liable for damages arising from the smaller of two reinsurance transactions the state attorney general charged were fraudulent.

But in his ruling last week, New York State Supreme Court Justice Charles E. Ramos also refused to grant summary judgment for the state on another count related to a sham finite reinsurance deal between AIG and Berkshire Hathaway Inc.'s General Re Corp., paving the way for the matter to be considered at trial.

In its civil suit, the New York attorney general's office alleges that Mr. Greenberg and former AIG Chief Financial Officer Howard Smith had used the AIG/Gen Re deal—a 2001 loss-portfolio transfer—to hide AIG's losses and inflate the insurer's reserves.

In early 2008, federal prosecutors obtained five criminal convictions against four former Gen Re executives—including former Gen Re CEO Ronald Ferguson—and former AIG Vp of Reinsurance Christian Milton in connection with the 2001 finite deal. The prosecution charged that the sham transaction had increased AIG's reserves by about $500 million without any actual risk transfer. The convictions are on appeal.

Justice Ramos said in last week's decision that the facts regarding the Gen Re transaction in the case “strongly suggest knowledgeable conduct on the part of Greenberg.” But in the absence of direct testimony about his knowledge of the structuring of the deal without enough risk transfer from the other participants in the scheme, the evidence against him is “too remote” to charge him when confronted with his denials, Justice Ramos wrote.

Concerning New York Attorney General Andrew Cuomo's allegations that Mr. Smith was the individual primarily responsible for improperly accounting for the Gen Re transaction as insurance, “credibility determinations” also must be made regarding Smith's testimony. For example, Mr. Smith said he has no recollection of a meeting in late 2000 at AIG's headquarters that he allegedly attended, in which AIG was advised how Gen Re was going to account for the deal.

Justice Ramos held that Messrs. Greenberg and Smith are liable for the alleged improper use of an offshore vehicle—Barbados-based Capco Reinsurance Co. Ltd., as a shell corporation to take on auto warranty losses AIG had generated in the mid-1990s as way to remove them from the insurer's books.

The Capco deal constituted “fraudulent or deceitful practices that tended to mislead the investing public as to the true financial health of AIG,” wrote the justice. Messrs. Greenberg and Smith were “indisputably aware” of the deal and they spearheaded its deceptive aims, according to the court documentation. They failed to show that the Capco deal didn't cause any damage, and the purported amounts involved have “yet to be litigated,” according to the decision. Any damages will be determined later.

The state civil lawsuit against Messrs. Greenberg and Smith initially was brought by then New York Attorney General Eliot Spitzer in 2005.

Attorneys for Messrs. Greenberg and Smith stressed that Justice Ramos refused to grant summary judgment for the state regarding the Gen Re transaction.

“Justice Ramos denied the New York Attorney General's motion for summary judgment on the Gen Re transaction, which constitutes the bulk” of the attorney general's claims, Lee Wolosky, a partner in the New York law firm Boies, Schiller & Flexner L.L.P. who represents Mr. Greenberg, said in a statement.

He called the Capco transaction “not material, constituting less than 1% of AIG's net income during pertinent periods. Mr. Greenberg expects to prevail on his appeal of the court's decision granting summary judgment on liability on this single transaction.”

Vincent Sama, a partner with Winston & Strawn L.L.P. in New York who represents Mr. Smith, issued a statement saying that Justice Ramos “properly denied the New York attorney general's motion for partial summary judgment with respect to the Gen Re transaction.” He noted that the attorney general's office “had repeatedly called” that transaction “the "guts' of its case.”

Mr. Sama said in his statement that “we believe that Justice Ramos misapplied the relevant law and ignored the substantial evidence regarding the Capco transaction, which was not a material transaction for AIG,” and which involved the participation of more than 20 AIG lawyers. “Available evidence demonstrates that Mr. Smith did nothing wrong with respect to the Capco transaction, and the court's disposition of the motion with respect to the Capco transaction is particularly unfortunate since the court did not give the parties an opportunity to provide oral argument on that transaction.”

He added that “we are confident that Mr. Smith will be fully vindicated on appeal.”

The attorney general's office did not return a call for comment.

A legal expert with no ties to the case said the fact that the Gen Re allegations can proceed to trial increases pressure for a settlement.

“The Capco side is certainly the smaller of it,” said Peter Henning, a professor at Wayne State University Law School in Detroit. “I think the important thing is that it's heading to trial now so the pressure to settle has increased. This is all that's left of the Gen Re/AIG case. The criminal side of the case is gone.

“It's all that's left of the all the litigation since Mr. Greenberg left AIG,” he said.