In the 1933 case of Fidelity & Deposit Co. of Maryland v. Arenz, the U.S Supreme Court ruled on a dispute involving an insurance company and its insured party over liability for losses incurred due to fraudulent activity by employees. The plaintiff, Fidelity & Deposit Company of Maryland had issued a fidelity bond to cover any loss that defendant Arenz might suffer from dishonest acts committed by his employees in their employment capacity. When one employee embezzled funds, Arenz sought recovery under this policy but was denied because he had not discovered and reported the loss within fifteen days after receiving an audit report revealing discrepancies as required by the terms of the bond agreement. The court held that while it is permissible for parties to contractually limit periods for filing claims shorter than those prescribed by statute, such provisions must be reasonable and cannot operate as traps for unwary policyholders who may have difficulty discovering fraud or dishonesty within such short time frames without specific knowledge or suspicion thereof. Therefore, despite contractual language requiring discovery and reporting within fifteen days after receipt of an audit report showing discrepancies (which would indicate potential dishonesty), if there were no actual knowledge or reason to suspect wrongdoing at that point in time then failure to comply with these requirements does not bar recovery under fidelity bonds.

The dissenting opinion in the case of Fidelity & Deposit Co. of Maryland v. Arenz argued that the majority's decision to allow a surety company to be held liable for an employer's failure to pay wages was incorrect and inconsistent with previous rulings. The dissenting justices believed that a bond, which is essentially an insurance policy, should not cover wage claims as they are not losses resulting from dishonest acts by employees but rather obligations incurred in the ordinary course of business operations. They also pointed out that if such bonds were intended to guarantee payment of all debts, including wages, then it would have been explicitly stated in their terms and conditions instead of being limited only to losses due to fraudulent or dishonest acts by employees.