In the case of United States v. United States Fidelity & Guaranty Company, the Supreme Court ruled in 1914 that a surety company could not be held liable for damages beyond its bond obligation. The U.S government had contracted with a construction company to build post offices and courthouses, requiring them to provide bonds from two sureties as insurance against failure to fulfill their contract obligations. When one contractor defaulted on his contracts, the government sued both him and his sureties for damages exceeding those covered by the bonds. However, it was decided that while contractors can be held responsible for all losses resulting from their defaulting on a contract, this liability does not extend to their guarantors or insurers (the surety companies). Therefore, these companies cannot be required to pay more than what they agreed upon in their original bond agreement.

In the dissenting opinion for United States v. United States Fidelity & Guaranty Company, the justice argued that the majority's interpretation of a statute was incorrect and overly broad. The justice believed that this misinterpretation led to an unjust outcome in which a private company was held liable for damages it did not cause directly or indirectly. The dissent also criticized the majority's decision as setting a dangerous precedent where companies could be held accountable for any harm related to their business activities, regardless of whether they were at fault or not. This would create an undue burden on businesses and potentially stifle economic growth and innovation due to fear of excessive legal liability.