Opinion ID: 765488
Heading Depth: 3
Heading Rank: 3

Heading: The Federal Policy

Text: 23 Effective February 7, 1986, PEC purchased a Crime Insurance Policy (the Federal Policy) from Federal, which is a member of the Chubb Group of Insurance Companies. Section 2. Exclusions of the Federal Policy provides that coverage does not apply to: (H) loss unless reported and proved in accordance with Section 4.5 hereof; (I) loss unless discovered and written notice given to [Federal] within (1) sixty days following termination of this policy in its entirety. Section 4.5 provides in pertinent part: [u]pon knowledge or discovery . . . of loss . . . written notice shall be given at the earliest practicable moment, and in no event later than sixty days after such discovery. Section 4.8 of the Federal Policy further provides that, 24 [a]t any time prior to the termination of this policy in its entirety . . . the Insured may give written notice to [Federal] that it desires an extension of the period for discovery of loss under this policy from sixty days to one year and shall pay an additional premium for such extension. 25 Section 6.2 of the Federal Policy specifies that termination is effective (A) thirty days after the receipt by the Insured of a written notice of termination from the Company or (B) upon the receipt by the Company of a written notice of termination from the Insured. However, Endorsements No. 5 and 33 to the Federal Policy prohibit either party from canceling without first giving notice to two of PEC's customers: 26 no change in or cancellation of this bond, whether by or at the request of the Insured or by the Company shall take effect prior to the expiration of forty five (45) days after notice by registered mail of such change or cancellation of this bond has been received by the office[s] of the Department of Finance of the City of New York [and] . . . the New York City Transit Authority. 27 By letter dated December 6, 1988, PEC notified M&S of its intention to non renew the Federal Policy, effective February 7, 1989. Marshall & Sterling forwarded that letter to Federal by fax. On February 10, 1989, Robert Felzenberg signed a Cancellation Notice prepared by Federal effective February 7, 1989. No premiums were paid by PEC to Federal after that date. Payroll Express obtained substitute coverage from LEU for the loss payees of the Federal Policy from the date of its cancellation of the Federal Policy. It is disputed whether PEC or Federal ever notified the Department of Finance of the City of New York or the New York City Transit Authority of the cancellation.