Legal Ethics

$1.25 M Sanction for Law Firms, Client in WTC Insurance Coverage Case

Trying to conceal an insurer’s agreement to provide coverage for the World Trade Center before the Sept. 11, 2001 terrorist attacks is costing two law firms and a client insurance company a cool $1.25 million.

A federal judge yesterday sanctioned the firms, Wiley Rein and Coughlin Duffy, and their client, Zurich American, in this amount, for withholding evidence and asserting unsupported defenses in an insurance coverage case, reports the Wall Street Journal law blog. The judge did not say how the $1.25 million was to be apportioned among the three.

The sanctions ruling concerned a primary commercial general liability policy issued by Zurich for the WTC. After the Sept. 11 attacks, Zurich contended in an insurance coverage case that it had agreed to insure only the lessor of the twin towers, not the buildings’ owner, the Port Authority of New York and New Jersey. Zurich concealed the existence of a 62-page electronic document that supported the Port Authority’s claim for coverage, the judge found. And, although Wiley Rein got a copy of the document in 2003, the firm didn’t produce it in discovery until 2005.

“Zurich, as the lead insurer on the case, and its attorneys, as lead counsel in the proceeding before me, owed the court and the public better conduct,” writes Judge Alvin Hellerstein, of the Southern District of New York, in his sanctions opinion.

The law firms and their client did not comment.

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