Lawsuit highlights surety bonds uncertainty

JP Morgan Chase last month sued nine multi-line insurance companies, alleging that they failed to pay on a total of $1.1 billion in surety bonds backing prepaid forward natural gas and crude oil contracts that the bank had entered into with Enron. The bank said the insurers failed to pay on schedule on December 21. The insurers argued that ongoing investigations into allegations of fraud at the bankrupt energy firm allow them to withhold payment.

The fallout from the lawsuit could further