World Trade Center 9/11 Insurer and Law Firms Sanctioned $1.25 Million
United States District Court Judge Alvin K. Hellerstein (Southern District of New York) has imposed sanctions totalling $1,250,000.00 against Zurich American Insurance Company and two of its law firms for failing to timely produce documents that defeated Zurich's attempt to avoid lliability insurance obligations regarding lawsuits brought by the legal successors of many of those who died and many of those who suffered personal injuries or suffered property damage in the September 11, 2001 terrorist attacks. Judge Hellerstein imposed the sanctions pursuant to Rule 11 and Rule 37 of the Federal Rules of Civil Procedure based upon a thorough analysis of what Zurich and its lawyers knew and when they knew it. In particular, Judge Hellerstein pointed to Zurich's "culpable state of mind" in intending to delete and in fact deleting from its files the electronic version of Zurich's insurance policy that its chief underwriter for the United States had printed-out (62 pages in length) on September 11, 2001. This version established Zurich's intent to underwrite insurance covering the owner and lessees of the World Trade Center for risk's encompassing the 9/11 attacks. Judge Hellerstein inferred that Zurich recognized almost simultaneously with the attacks that it would need to respond to and potentially litigate claims on its insurance policy for the catastrophic damage to life and property caused by the terrorists. Discovery proceedings in the case revealed the existence of an email of a Zurich underwriter sent to assistants and to her supervisor seeking confirmation that the 62-page version of the policy printed-out on 9/11 was deleted from Zurich's Document Library and replaced with the final corrected policy (which Zurich issued on November 16, 2001, and which differed from the 9/11 version). Although the electronic version had been deleted from Zurich's system, the printed out version was retained, and, in fact, Zurich's chief United States underwriter had made a hand-written note on the cover page of the policy: "pulled from [Zurich computer system] 9-11-2001." Judge Hellerstein obviously did not credit Zurich's excuse of "forgetting" or "losing" the 9/11 printed policy for its inordinate delay in producing this and other inculpating documents. Judge Hellerstein wrote: "The document, at 62 pages in length and clearly important, is not the type of document that inadvertently becomes lost without a trace." The Judge observed that without the persistence of adverse counsel, the document would never have been produced, implying that he believed that Zurich's intention was to deliberately violate its discovery obligations. The sanctions against Zurich and the two law firms were imposed jointly and severally, with either of them able to request an allocation from the court.
