In the case of Standard Accident Insurance Co. v. U.S for the Use and Benefit of Powell et al., Receivers, Etc., 1937, the Supreme Court was asked to determine whether a surety company could be held liable for losses incurred by a bankrupt principal under a construction contract with the federal government. The court ruled in favor of Powell and others (receivers), stating that under Miller Act bonds, sureties are responsible for any loss or damage suffered as result of non-performance by their principals. This decision established an important precedent regarding liability in cases involving federally-funded construction projects where contractors become insolvent before completion.

The dissenting opinion in the case of Standard Accident Insurance Co. v. U.S for the Use and Benefit of Powell et al., Receivers, Etc., argued that the majority's decision was a departure from established legal principles regarding suretyship law. The dissent took issue with the majority's interpretation of Section 270b(a) of Title 40, arguing that it did not intend to make sureties liable beyond their bond obligation when they were unaware or had no control over an increase in contract price due to modifications made without their consent. They contended that this ruling would place an unfair burden on insurance companies who act as sureties by making them responsible for costs they could not have foreseen or controlled.