The US Federal Claims Court has allowed former AIG Chairman and CEO Hank Greenberg to continue legal action against the US Government over its bailout of the insurer in 2008.

Justice Thomas Wheeler says Mr Greenberg’s Starr International Group – which was one of the largest AIG shareholders – claims Washington violated the Fifth Amendment to the US Constitution, concerning the seizure of private property without fair compensation.

The Government owned most of AIG in November 2011 when the action began, but as it began to sell down Starr asked the company to join the litigation.

The AIG board refused earlier this year amid public anger that the insurer might sue the government that rescued it.

Justice Wheeler last week granted AIG and Government motions to dismiss some of Starr’s claims, but noted “Starr has raised some concerns worthy of thoughtful consideration”.

Mr Greenberg ran AIG for almost 40 years but stepped down in 2005 amid investigations by the New York Attorney-General and Securities and Exchange Commission.