MBIA Insurance Corp. may still have to pay some insurance claims on ABS deals it wrapped for now-bankrupt student loan lender Student Finance Corp. after hundreds of millions of dollars of that company's student loans defaulted as a result of alleged fraud.

In an opinion by the U.S. Court of Appeals for the Third Circuit, a judge found that the insurance company that insured Student Finance Corp.'s student loans, American International Group unit Royal Indemnity, might be freed from its obligation to pay a portion of those losses. If so, the remaining losses would have to be covered by MBIA. However, an attorney for MBIA feels the amount of the company's exposure will be minimal and possibly nil.

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