* 2nd Circuit rejects Con Edison appeal over 2001 attacks
* Con Ed accused Silverstein, Tishman of negligence
* Collapse of 7 World Trade Center crushed Con Ed substation
By Jonathan Stempel
NEW YORK, Dec 4 (Reuters) - A federal appeals court in New York has given developers and builders of high-rises and other buildings added protection from lawsuits over property losses linked to terrorism, in a case stemming from the Sept. 11, 2001 attacks.
A divided panel of the 2nd U.S. Circuit Court of Appeals said Consolidated Edison Inc and its insurers could not pursue damages for negligence over the crushing of the utility's electrical substation beneath the original 7 World Trade Center, which was destroyed in the attacks.
Con Ed argued that negligence by companies controlled by Larry Silverstein, the developer and leaseholder, and the constructor Tishman Construction Corp., caused the 47-story tower to collapse, resulting in the substation's destruction.
Circuit Judge Rosemary Pooler nevertheless concluded that the building, which was completed in 1987, "would have collapsed regardless of any negligence ascribed by plaintiffs' experts" to its design and construction.
"It is simply incompatible with common sense and experience to hold that defendants were required to design and construct a building that would survive the events of September 11, 2001," Pooler wrote for a 2-1 majority.
The decision could make it harder to hold building developers and constructors liable for damages from major acts of terrorism that can be effectively impossible to guard against.
The collapse of the World Trade Center tower occurred about 8-1/2 hours after the attacks began, and seven hours after firefighters for safety reasons stopped fighting fires that had broken out in the building.
In Sept. 2011, U.S. District Judge Alvin Hellerstein in Manhattan, who handles many Sept. 11 cases, dismissed Con Ed's lawsuit. He said the defendants did not owe a duty of care to take extra precautions to guard against the "unforeseeable" events that took place.
The 2nd Circuit said this reasoning was wrong, and that the risk of "massive fire" in a high-rise building was foreseeable.
Pooler nonetheless said Con Ed's theory could have exposed owners and developers to an impermissibly broad array of damages, including "tort" damages for private harms.
"Under Con Ed's approach to liability, those who designed and constructed the building would presumably be liable if, for example, 7 WTC collapsed as a result of a fire triggered by a nuclear attack on lower Manhattan," Pooler added. "While the concepts underlying tort law must, by their nature, be fluid, at the end of the day they must engage with reality."
Con Ed spokesman Bob McGee said: "We are reviewing the decision, and evaluating our options for further review."
Franklin Sachs, a lawyer representing the utility and its insurers, did not immediately respond to a request for comment.
Bud Perrone, a spokesman for Silverstein, said: "We are pleased that the Court of Appeals has affirmed the dismissal of these claims."
Kenneth Schwarz, a lawyer for Tishman, did not immediately respond to a request for comment.
Circuit Judge Barrington Parker joined Pooler's decision.
Circuit Judge Richard Wesley dissented, and would have returned the case to Hellerstein for a possible trial.
"Plaintiffs' experts have articulated a standard of care: high-rise buildings must be built to withstand a fire that cannot be extinguished by the efforts of firefighters," Wesley wrote. "One would think that, on this record, the majority, would want to hear from defendants' experts on why 7 WTC collapsed."
The Sept. 11 attacks caused close to 3,000 deaths. A new, 52-story 7 World Trade Center opened in 2006.
The case is Aegis Insurance Services Inc et al v. 7 World Trade Center Co et al, 2nd U.S. Circuit Court of Appeals, No. 11-4403.