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Insurer and Its Attorneys Sanctioned in 9/11 Litigation

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In an unfortunate series of events, recently two law firms and an insurance company client involved in coverage litigation concerning the aftermath of the 9/11 tragedy have been sanctioned a total sum of $1.25 million dollars. The judge sanctioned these parties for failing to disclose various key documents concerning applicability of insurance coverage and other discovery abuses which have:

added years and millions of dollars to the cost of prosecuting suits on behalf of people who died or were injured or suffered property loss in the 2001 attacks.

Pending insurance coverage litigation over the last several years involved whether private insurance carriers ever intended to insure various entities or persons who suffered property loss or loss of life in the September 11 tragedy. Usually the question of coverage involves a detailed review of the terms and conditions of an insurance policy together with other materials or memoranda prepared prior to issuing a policy and binding coverage.

One law firm representing Zurich Insurance Company in the coverage litigation suggested at a hearing in December, 2003 that:

“We have plenty of evidence that, believe me, we can invoke on this issue of whether [the Port Authority] is an additional insured at all.”

The judge said those representations were contradicted by the 62-page document and other evidence showing that Zurich employees knew the liability insurance coverage sought by Larry Silverstein’s World Trade Center Properties was meant to include the Port Authority.

The practice of destroying relevant documents or omitting disclosure of relevant information should never occur in any context in any litigation by any party. Unfortunately, this series of events occurred in the context of litigation involving a dark event in our nation’s history. Kudos to the judge for identifying the issues and sanctioning the offending parties. Hopefully exposing the conduct and sanctioning the offending parties will curb further discovery abuses and lead to a prompt resolution of these coverage claims.