J.P. Morgan ( JPM), its stock up 65% since bottoming at $15 on Oct. 9, is about to see its headline-risk quotient head back into the stratosphere. The stock of the nation's second-largest bank has outpaced both the Dow industrials and the Philadelphia KBW Bank Index since then, in part because the cacophony of negative publicity it faced over the summer had finally quieted down. That run of good luck on the bad news front will very likely end Monday with the beginning of a civil trial in federal court in New York. The case is about J.P. Morgan's attempt to force a group of 11 insurers to honor a $1 billion insurance policy it took out on $3.7 billion in so-called prepay oil and gas contracts the bank arranged for Enron through an off-shore corporation called Mahonia. The insurers, which include Liberty Mutual, Travelers Property & Casualty ( TAPA) and Safeco Insurance ( SAFC), have refused to pay the bank's claim, contending the energy trades were nothing more than a series of "disguised'' bank loans to Enron and not actual contracts to transfer energy shipments. The insurers claim the policy is negated by the alleged fraud on J.P. Morgan's part. But this legal battle is much more than a dispute over the validity of a $1 billion insurance policy. Already in many investors' minds, the Mahonia transactions have tarnished J.P. Morgan's reputation and raised questions about the bank's risk-management strategies and corporate governance procedures. This summer, lawmakers on Capitol Hill, during a highly publicized Senate subcommittee hearing, denounced the Mahonia deals as "sham" transactions and accused J.P. Morgan of helping Enron improperly inflate its revenues. J.P. Morgan repeatedly has denied the lawmakers' allegations and steadfastly maintained that all of its business dealings with Enron were legitimate. But it hasn't helped J.P. Morgan's case that U.S. District Judge Jed Rakoff has consistently sided with the insurers in several pre-trial motions in the case. Just last month, Rakoff ruled the insurers had presented sufficient evidence of fraud by the bank to allow a jury to decide the matter.