In the Prudence Co., Inc. v. Fidelity & Deposit Company of Maryland et al., 1935, the Supreme Court ruled on a dispute involving a bond agreement between The Prudence Company and Fidelity & Deposit Company of Maryland. The case arose when Prudence defaulted on its bonds, leading to litigation by bondholders who were insured by Fidelity. In response, Fidelity sought indemnity from Prudence for losses incurred due to the default under an indemnification clause in their contract. However, this claim was rejected as it was found that such clauses are not enforceable if they protect against one's own negligence or wrongdoing unless explicitly stated otherwise in clear and unequivocal terms within the contract itself - which wasn't present here.

In the dissenting opinion for The Prudence Co., Inc. v. Fidelity & Deposit Company of Maryland et al., Justice Stone argued that the majority's decision failed to properly interpret and apply New York state law, which should have governed this case due to its jurisdictional relevance. He contended that under New York law, a surety is liable only if it has consented in advance to changes in an underlying contract; otherwise, any alterations discharge the surety from obligation. In this case, he believed there was no evidence indicating such prior consent by Fidelity & Deposit Company of Maryland when amendments were made to contracts between Prudence Co., Inc and third parties involved in construction projects insured by Fidelity & Deposit Company of Maryland as a surety bond provider. Therefore, according to his interpretation of state law principles applied on federal level through Erie doctrine (although not yet established at that time), these modifications should have released the latter company from liability rather than imposing it as decided by majority ruling.