Lawyers Wiley Rein and Coughlin Duffy stand to lose significant money from a failure to disclose a key document and other discovery issues relating to the 9/11 attacks.

Failure to disclose a key document on insurance coverage for the Port Authority at the World Trade Center in the aftermath of the Sept. 11 terror attacks and other discovery abuses is going to cost Wiley Rein and Coughlin Duffy.

The two law firms and the company they represented, Zurich American Insurance Companies, have been whacked with $1.25 million in sanctions by Southern District of New York Judge Alvin Hellerstein, who said document destruction by Zurich employees and misleading statements by their attorneys 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.

The judge did not dictate how much each of the three sanctioned parties should pay of the $1.25 million, leaving the door open for any of those sanctioned to “discuss the subject of allocation.”

But it was Wiley Rein partner Thomas Brunner, the lead counsel for all the primary and excess insurers in the case, who was singled out for criticism for telling Judge Hellerstein on Dec. 23, 2003, “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.

It was “clearly important,” and “not the type of document that becomes lost without a trace,” Hellerstein wrote in In re September 11th Liability Insurance Coverage Cases, 03 Civ. 332. The discovery abuses also concealed that Westfield Corporation, a major retailer at the site, was one of the “additional insureds” that Zurich was obligated to cover under its policies with Silverstein.

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