MARTINEZ, Calif. -- As far as American International Group Inc.'s coverage is concerned, the rubber isn't meeting the road, a policyholder's lawsuit claims.

The insurer's advertising isn't all it's stacked up to be either, Walnut Creek, Calif.-based Owens Financial Group Inc. alleges in a bad faith and false advertising lawsuit filed earlier this month in Contra Costa Superior Court in Martinez, Calif.

Owens claims AIG improperly denied it coverage for a lessor's tire recycling site shut down by California pollution prevention authorities.

Owens is also claiming false advertising over the insurer's magazine advertisements that tout solutions for environmental risks. The specific advertisement is a stark, black-and-white photograph depicting a mountain of discarded tires stacked so high it easily dwarfs three men walking along a road cutting through the dump where millions of tires are stacked.

"Dump them, you break the law. Recycle improperly, you break the law. Meanwhile, more tires just came in," reads part of the advertisement, which ran for months in several magazines, including Business Insurance.

AIG, in a written statement responding to the lawsuit's allegations, said it denied Owens' insurance claims because the mortgage loan company is not entitled to coverage under the terms of the AIG policies, originally issued to Wenbury Environmental Ltd., a now-insolvent tire recycling operation that leased property from Owens.

Owens and its attorneys view the advertisement as proof that AIG specifically targeted tire recycling operations with the potential for environmental problems, the lawsuit indicates.

But in its lawsuit, the plaintiff alleges AIG is denying it coverage under a pollution legal liability policy by claiming that tires are not pollutants, said Jordan Stanzler, a partner in the San Francisco office of Anderson Kill & Olick P.C. Mr. Stanzler represents Owens.

"I have not seen anything like this in terms of the specificity of the advertising and the irony of the tires," he said. "And they say tires are not a pollutant."

On the other hand, AIG has also denied Owens coverage under a commercial general liability policy because the insurer claims tires are a pollutant, Mr. Stanzler said. The two policies were purchased simultaneously, as required by AIG, Mr. Stanzler added.

American International Specialty Lines Insurance Co. wrote the Pollution Legal Liability Select policy for Wenbury with limits of $1 million per incident and a $1 million coverage section aggregate. Commerce & Industry Insurance Co. provided the CGL policy, with limits of $2 million per occurrence and $2 million aggregate, the lawsuit states. Both companies are units of AIG. AIG Technical Services Inc., which provides claims services, also is named in the suit.

Further compounding the irony, tens of thousands of the very tires that ended up in the recycling site at which the insurer is denying cleanup coverage came from the dump photographed for AIG's advertisement, Mr. Stanzler said. The site pictured in the ad is not the site involved in the suit.

AIG, in its statement, said the tire advertisement does not target tire recycling companies and that it does not address specific coverage provisions.

"An advertisement is an advertisement, while a policy is a contract between the insurer and the insured," AIG said in a statement. "The terms of the policy, not statements in an advertisement, determine coverage."

Owens tendered a claim under a CGL policy issued to Wenbury, and Owens was not a named policyholder and it "was not entitled to coverage," according to AIG. Additionally, the policy does not cover claims for injunctive relief and civil penalties, which were the basis for the tender, AIG says.

Owens' and Wenbury's claims under the pollution liability policy were denied for several reasons, according to AIG. Tires are not considered a pollutant, according to policy language. The policy is a claims-made form, and the claim was not reported until after the policy period's expiration, AIG says. Furthermore, the existence or moving of stored tires is not a pollution condition, and the policy is for a pollution condition.

The plaintiff disagrees. The CGL policy was issued with Wenbury as the policyholder, but Owens is listed as an additional insured, according to the lawsuit.

Owens' and Wenbury's relationship dates to January 1997, when Owens leased property in Merced, Calif., to Wenbury on the condition that Wenbury purchase insurance for the tire recycling operation it planned to operate there.

But Wenbury stopped operations not long after starting up when the California Integrated Waste Management Board in June 1997 issued a cleanup and abatement order for the Merced site. Orders were issued to Wenbury and Owens. Wenbury went out of business and thus abandoned the property, leaving Owens strapped with what it initially estimates as $900,000 in cleanup and landfill fees for disposing of the tires.

Owens eventually was given until October to clean up the property, and it began notifying AIG last summer that it was seeking coverage. Owens claims in its lawsuit that AIG specifically promised that there was coverage for cleanup and removal of the tires in the event that Wenbury abandoned the property.

Owens also sought coverage from United Capitol Insurance Co. United is named in the lawsuit and denied Owens coverage for several reasons. Those include that there is no claim for bodily injury or property damage and that the conditions cited by California authorities are not "pollution conditions," the lawsuit states.

United Capitol officials could not be reached.

United Capitol's specialized pollution policy was purchased by Wenbury after AIG declined to renew its policy for the Merced site, Mr. Stanzler said. The United policy has limits of $1 million per occurrence and $2 million aggregate.

Another defendant named in the lawsuit is W. Robert Stoker, a principal at Davis-Stoker Associates Insurance Services in Thousand Oaks, Calif. He placed Wenbury's coverage, according to the suit.

Mr. Stoker declined comment, saying he first would have to get approval from his errors and omissions insurer.