In the case of Title Guaranty and Surety Company v. State of Idaho for the Use of Allen, 1915, the U.S Supreme Court was tasked with determining whether a surety company could be held liable for damages when their principal defaulted on a contract. The dispute arose from an agreement between contractor J.H. Watts & Co., who had been hired to construct roads in Shoshone County, Idaho, and its bond provider Title Guaranty and Surety Company (TGSC). When Watts failed to complete the work as agreed upon due to financial difficulties, TGSC refused to cover losses incurred by Shoshone County arguing that they were not responsible because there was no breach of contract since it wasn't explicitly stated in their bond agreement that they would cover such losses if Watts became insolvent or bankrupted. However, after examining both state law and precedent cases where similar issues have arisen before them regarding bonds provided by sureties like TGSC; The court ruled against TGSC stating that even though insolvency isn't specifically mentioned within their bond agreement with Watts - it's implied under common law principles governing these types of agreements which hold sureties accountable for any default made by their principals regardless if it's caused by bankruptcy or other reasons.

In the dissenting opinion for Title Guaranty and Surety Company v. State of Idaho, it was argued that the majority's decision to hold a surety company liable for an embezzlement committed by its principal went against established legal principles. The dissent pointed out that under common law, a surety is only responsible for losses directly caused by its principal's failure to perform their duties faithfully - not those resulting from criminal acts like embezzlement. Furthermore, they contended that even if the bond contract could be interpreted as covering such actions, this would still go beyond what should reasonably be expected of a surety company. They also disagreed with the majority’s interpretation of Idaho state law on public officials' bonds and believed it did not support holding the surety liable in this case.