In the case of Aetna Casualty & Surety Co. v. Phoenix National Bank & Trust Co., 1931, the Supreme Court was tasked with deciding whether a surety company could be held liable for losses incurred by a bank due to fraudulent activities carried out by one of its employees who had been bonded by the surety company. The employee in question had embezzled funds from his employer, Phoenix National Bank and Trust Company, which led to significant financial loss for the bank. The court ruled that Aetna Casualty and Surety Company, as the bonding entity responsible for ensuring against such losses under their agreement with Phoenix Bank, was indeed liable for these damages despite arguments made on behalf of AETNA that they should not be held accountable because there were discrepancies between what they believed their liability coverage entailed versus how it was interpreted by Phoenix Bank.

The dissenting opinion in the case of AETNA CASUALTY & SURETY CO. v. PHOENIX NATIONAL BANK & TRUST CO., 1931, argued that the majority's decision was a departure from established legal principles regarding suretyship and indemnity. The dissent contended that under these principles, a surety is entitled to be exonerated by its principal before being compelled to pay on behalf of said principal. In this case, it was believed that Phoenix Bank should have sought payment from its primary debtor (the contractor) before seeking compensation from Aetna Casualty as the surety company providing performance bonds for construction contracts. Furthermore, they disagreed with the majority's interpretation of Pennsylvania law concerning public works contracts and asserted there were no statutory provisions or court decisions supporting such an interpretation.