Brown chicken in hot oil in a large skillet; drain, and transfer to a 13- x 9- x 2-inch baking dish. Reserve drippings in skillet. Sauté onion and mushrooms in drippings until tender. Add next 8 ingredients; mix well. Cook over medium heat 5 minutes. Add olives, and mix well. Remove bay leaf.
Pour mixture over chicken. Cover, and bake at 350° for 45 minutes or until chicken is tender.