THE PENN TRAFFIC COMPANY PLAINTIFF APPELLANT RESPONDENT v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH PA DEFENDANT RESPONDENT APPELLANT (2010)

MEMORANDUM AND ORDER

Appeal and cross appeal from an order of the Supreme Court, Onondaga County (Deborah H. Karalunas, J.), entered March 4, 2010 in a breach of contract action.   The order denied the motion of plaintiff for partial summary judgment and granted in part and denied in part the cross motion of defendant for partial summary judgment.

It is hereby ORDERED that the order so appealed from is unanimously modified on the law by granting the cross motion in its entirety and dismissing the complaint and as modified the order is affirmed without costs.

As plaintiff acknowledges, it did not make a claim for any defense costs within the two-year policy period, and thus the issue of coverage turns on whether the relation-back provision of the policy applies.   Pursuant to that provision, a claim made after the policy period will be honored if the insured provided written notice during the policy period of circumstances that could “reasonably be expected to give rise to a Claim being made against an Insured, ․ with full particulars as to dates, person and entities involved.”   We reject the contention of plaintiff in support of its appeal that its letter of October 7, 2002 provided sufficient notice of the circumstances relating to the promotional allowances investigation, inasmuch as that investigation did not commence until approximately two years later.   The letter in question provided defendant with notice of the Penny Curtiss investigation only, and, as the court properly determined, that investigation was separate and distinct from the promotional allowances investigation.   The two investigations involved different employees, different accounting irregularities, and different time periods, and it therefore cannot be said that notice of the Penny Curtiss investigation constitutes notice of promotional allowances investigation as well.   Thus, contrary to the contention of plaintiff on its appeal, the court properly granted those parts of defendant's cross motion with respect to the promotional allowances investigation.

We agree with defendant on its cross appeal, however, that the court erred in failing to grant its cross motion in its entirety, and we therefore modify the order accordingly.   Although the SEC subpoenas of March 31, 2004 concerning the Penny Curtiss investigation were issued to plaintiff's employees within the policy period, it is undisputed that plaintiff failed to provide notice of the claim to defendant with respect to the two subpoenas until late April 2006, almost two years after the policy expired.   Indeed, as previously noted, by letter to defendant in August 2004 plaintiff affirmatively represented that it had no claims to date.  “The insured's failure to satisfy the notice requirement constitutes ‘a failure to comply with a condition precedent which, as a matter of law, vitiates the

contract' “ (Great Canal Realty Corp. v. Seneca Ins. Co., Inc., 5 NY3d 742, 743, quoting Argo Corp. v. Greater N.Y. Mut. Ins. Co., 4 NY3d 332, 339).   In determining that an issue of fact exists whether plaintiff provided timely notice of the March 2004 subpoenas to defendant, the court erred in relying on cases involving policies that required the insured to provide notice of claims “as soon as practicable” (see e.g. Matter of Allstate Ins. Co. [Earl], 284 A.D.2d 1002, 1003-1004).   Here, the policy contains different notice requirements.   It provides that notice must be given “as soon as practicable ․, but in no event later than ․ the end of the Policy Period or Discovery Period,” which, as noted, ended in August 2004, well before plaintiff notified defendant of the subpoenas.   We thus conclude that plaintiff's failure to comply with that requirement vitiates the contract with respect to the subpoenas issued by the SEC on March 31, 2004 (see generally Rochwarger v National Union Fire Ins. Co. of Pittsburgh, Pa., 192 A.D.2d 305).

Finally, we reject the contention of plaintiff that its failure to give timely notice of the claim arising out of the March 2004 subpoenas should be excused because it did not realize that the subpoenas were covered under the policy until after the deadline date.   The policy unambiguously includes the subject subpoenas within the definition of potential claims, and plaintiff's unilateral mistake in reading the policy cannot serve as a basis for expanding coverage.   “[O]ne who executes a plain and unambiguous [contract] cannot avoid its effect by merely stating that [he or] she misinterpreted its terms” (Koster v. Ketchum Communications, 204 A.D.2d 280, lv dismissed 85 N.Y.2d 857).

Patricia L. Morgan

Clerk of the Court