In the case of United States Fidelity and Guaranty Company v. United States for the Benefit of Kenyon, 1906, a dispute arose over a contract between the U.S. government and W.B. Ferguson & Co., which was insured by US Fidelity and Guaranty (USF&G). The company failed to complete its contractual obligations with the government, leading to claims against USF&G's bond guaranteeing performance. A subcontractor named Kenyon also claimed payment from this bond due to unpaid work on the project. The Supreme Court ruled in favor of both parties - allowing them each to claim their respective amounts from USF&G’s bond under different legal principles: The U.S Government could recover because it had not been fully compensated for damages resulting from non-performance; while Kenyon could recover as he had not received full payment for his services rendered under subcontract. This decision established that surety bonds can be used simultaneously by multiple parties seeking compensation or reimbursement when an entity fails in its contractual duties.

In the dissenting opinion for United States Fidelity and Guaranty Company v. United States for the Benefit of Kenyon, Justice Harlan argued that the majority's decision was inconsistent with previous rulings regarding surety bonds. He contended that a surety company should not be held liable when it has no knowledge or control over how its principal uses funds obtained through bonded contracts. In this case, he believed that U.S.F.&G Co., as a surety, had fulfilled its obligation by ensuring completion of contracted work after default by its principal (Kenyon). However, they were unaware and uninvolved in Kenyon’s misuse of government advance payments meant to cover labor costs which led to claims against them under their bond agreement. Therefore, holding them accountable would unjustly expand their liability beyond what was agreed upon in the bond contract.