WTC Insurer and Its Counsel Hit with E-Discovery Sanctions
In re Sept. 11th Liab. Ins. Coverage Cases, 2007 WL 1739666 (S.D.N.Y. June 18, 2007)
The perils of e-discovery once again made headlines last month – this time in connection with the insurance coverage battles resulting from the September 11, 2001 terrorist attack on the World Trade Center. On June 18, United States District Judge Alvin K. Hellerstein, for the Southern District of New York, sanctioned Zurich American Insurance Company (“Zurich”) and its counsel, the law firms of Wiley Rein LLP and Coughlin Duffy LLP, $1.25 million upon finding that Zurich (i) asserted unsupported defenses, (ii) deleted electronic evidence, and (iii) delayed the production of a 62-page insurance policy (“the 9/11 document”) and other relevant documents.
At the heart of this complex insurance coverage action is the question whether the Port Authority of New York and New Jersey (“Port Authority”) and Westfield Corporation, Inc. (“Westfield”) are named insureds under a general liability policy issued to World Trade Center Properties LLP (“WTCP”). Zurich alleged that they were not. Zurich ultimately changed its position, however, when it produced documents that proved otherwise, long after those documents were first requested. These critical documents were in Zurich’s counsel’s possession for almost three years before they were produced. Concerned about the appearance of pleading and discovery abuses, the Court permitted the Port Authority and Westfield to seek sanctions under Rules 11 and 37 of the Federal Rules of Civil Procedure.