INSURERS WANT OUT OF ENRON CONTRACTS

March 11, 2002

Eleven major insurers are trying to find a way out of their respective Enron-related contracts to avoid potentially huge payouts related to the former energy giant’s collapse. The companies cite deception with regards to energy transactions between Enron and J.P. Morgan Chase. According to the Associated Press, the insurers have refused to pay $1.1 billion worth of guarantees to Morgan, insisting Enron officials misled them when executive liability policies were being written. A bankruptcy judge will rule on the issue shortly. Some legal scholars declared the liability coverage would be void if Enron executives are found guilty of fraudulent behavior. Insurers would then be left trying to recover payments. Several executives are currently under investigation by Congress, the Justice Department and the Securities and Exchange Commission. Companies such as Allianz AG’s Fireman’s Fund Insurance Co. and Chubb Corp.’s Federal Insurance Co. maintained that the agreements to Morgan were intended to guarantee deals centering on the delivery of natural gas and oil, and that the transactions were derivatives, or intricate financial contracts whose value is derived from an underlying security, index or commodity. They further argued that the transactions were not covered under the terms of the $1.1 billion in guarantees. Morgan denies any wrongdoing.

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Insurance Journal West March 11, 2002
March 11, 2002
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