Judge Fines Firms For Withholding Policy Information

A federal judge is fining two law firms for withholding information about an insurance policy that covered the World Trade Center at the time of the September 11, 2001, terrorist attacks.

The sanction, of $1.25 million, is against the firms Wiley Rein LLP and Coughlin Duffy LLP, as well as their client, the Zurich American Insurance Company.

The fine, imposed yesterday by Judge Alvin Hellerstein of U.S. District Court in Manhattan, comes at the end of more than five years of litigation over how much money Zurich American and other insurers must pay for the destruction of the World Trade Center. In all, insurers have settled the claims for about $4.55 billion.

One sticking point during the litigation was the extent of coverage that the Port Authority of New York and New Jersey received under an insurance policy negotiated by the developer Larry Silverstein. Silverstein Properties had leased the World Trade Center from the Port Authority in July, 2001.

During the high-stakes litigation, Zurich American and its attorneys initially kept hidden a copy of a 62-page policy that an employee at the company had printed out on the day of the attacks, Judge Hellerstein wrote in yesterday's decision. This hidden policy suggested that the insurer was responsible for coverage of both the Port Authority and another leaseholder, Westfield Corporation, Judge Hellerstein wrote.

Given the existence of this document, Judge Hellerstein wrote that Zurich's courtroom contentions about the insurance coverage it owed "were either dishonest, or objectively unreasonable, or the product of a failure to make reasonable inquiries."

The Port Authority will receive more than $600,000 of the total fine of $1.25 million, which is to be paid jointly by the two firms and Zurich American.

Two lawyers from each firm who were involved in the case did not immediately return calls for comment.