Halliburton to Appeal Court Ruling

The Delaware Chancery Court issued an opinion yesterday in the pending litigation between Halliburton and its Kellogg Brown & Root, Inc. subsidiary and Highlands Insurance Group, Inc.

The Court ruled that all of the fixed cost insurance policies issued by Highlands Insurance Company to Kellogg Brown & Root were terminated at the time of the spin-off of Highlands from Halliburton in 1996 pursuant to an agreement entered into by Halliburton and Highlands at that time.

This ruling is contrary to Halliburton’s interpretation of the provisions of such agreement and the parties’ interpretation of the applicable agreements for more than four years. Halliburton’s legal counsel, Vinson & Elkins LLP, has advised Halliburton that in its opinion it is likely that this ruling will be reversed on appeal to the Delaware Supreme Court since it is in clear contravention of the provisions of the applicable agreements between the parties.

Halliburton plans to file its appeal as soon as possible. Kellogg Brown & Root has recorded a receivable due from Highlands of $50 million as of December 31, 2000, plus an additional several million dollars since then. In the pending litigation Highlands has asserted that it does not owe such amount and that it is entitled to recover from Kellogg Brown & Root approximately $6 million that it has paid for claims made under the fixed cost policies since the spin-off.

Most of the amounts involved in this litigation relate to claims made by third parties against Kellogg Brown & Root for alleged exposure to asbestos contained in materials used in construction projects conducted by Kellogg Brown & Root.