In the case of Bramwell, Superintendent v. United States Fidelity & Guaranty Company (1925), the U.S. Supreme Court was tasked with determining whether a surety company could be held liable for losses incurred due to fraudulent acts committed by an employee who had been bonded by that company. The court ruled in favor of the United States Fidelity & Guaranty Company, stating that it could not be held responsible for such losses because its bond only covered honest mistakes or errors made in good faith and did not extend to deliberate fraud or dishonesty on part of the bonded employee. This decision clarified that surety companies are not insurers against all forms of loss but rather provide coverage based on specific terms outlined within their bonds.

In the dissenting opinion for Bramwell v. United States Fidelity & Guaranty Company, Justice McReynolds argued that the majority's decision to hold a surety company liable for an embezzlement committed by a bank employee was incorrect. He contended that the bond contract between the bank and surety company did not cover losses resulting from such acts of dishonesty unless they were discovered during the term of said contract. The justice believed that this interpretation was consistent with both common law principles and previous court decisions on similar matters. Furthermore, he pointed out inconsistencies in how different types of bonds were being interpreted under federal law due to this ruling, which could lead to confusion and unfair outcomes in future cases involving fidelity insurance contracts.