SYMPTOM:
In Strategy Distribution Services 10.x, the settings for delivery error handling under Project configuration is not applied to Report Services Documents.

CAUSE:
This is a known issue with Strategy Distribution Services 10.x.
ACTION:
Contact Strategy Technical Support for an update on the status of this case.
WORKAROUND:
Use Alert Based Subscription as a workaround. Refer to below technical note for detailed information:
KB46545: How to stop a Report Services Document subscription from sending if no data is returned in MicroStrategy Web 9.x