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No suit or action on this policy or for the recovery of any claim hereunder shall be sustainable in any court of law or equity unless the Assured shall have fully complied with all the foregoing requirements, nor unless commenced within twelve (12) months next after the happening of the loss; provided that where such limitation of time is prohibited by the laws of the State wherein this policy is issued, then and in that event no suit or action under this policy shall be sustainable unless commenced within the shortest limitation permitted under the laws of such State.

This policy is made and accepted subject to the provisions, exclusions, conditions and warranties set forth herein or endorsed hereon, and upon acceptance of this policy the Assured agrees that its terms embody all agreements then existing between himself and the Company or any of its agents relating to the insurance described herein, and no officer, agent or other representative of this Company shall have power to waive any of the terms of this policy unless such waiver be written upon or attached hereto; nor shall any privilege or permission affecting the insurance under this policy exist or be claimed by the Assured unless so written or attached.

In witness whereof, this Company has executed and attested these presents; but this policy shall not be valid unless countersigned by a duly authorized Agent of the Company.






Definition and General Nature.-A surety bond has been defined as a "written obligation, usually given under seal, to pay a sum of money under one or more expressed conditions, among which may be found negligence, breach of trust, disobedience of a law, failure to pay a judgment, failure to pay a debt voluntarily assumed, and other conditions under which losses may be sustained by personal acts." The surety is the party who "is responsible for the debt, obligation or conduct of another," and in corporate suretyship is a corporation. Broadly speaking, risks written by bonding companies are of three kinds, namely, fidelity bonds, contract bonds, and court bonds. This division has been recognized by the Insurance Law of New York, which defines suretyship as follows: (1) "guaranteeing the fidelity of persons holding positions of public or private trust"; (2) "guaranteeing the performance of contracts other than insurance policies"; and (3) "executing or guaranteeing bonds or obligations in actions or proceedings or by law allowed."

Although classed and supervised as insurance under the law, corporate bonding presents certain important features not usually associated with insurance. In the first place suretyship involves relations between three parties, namely, (1) the "surety," giving the guarantee and

1R. R. Brown, First Vice-President of the American Surety Company of New York, in a lecture at Princeton University. W. A. Thompson, Vice-President of the National Surety Company, in a lecture at Columbia University.

corresponding to the insurer; (2) the "obligee," receiving the protection and corresponding to the insured; and (3) the "principal" or "obligor" for whose debt, obligation or conduct the surety assumes responsibility. Nearly all classes of insurance permit cancellation of the contract, but this cannot be done by the surety company and its customer-the principal on the bond-unless the obligee, who possesses legal rights in the bond and for whose protection the bond was issued, gives his consent. In fact, certain bonds, owing to statute provisions, are rendered altogether noncancellable. Except in a limited number of cases where the right of subrogation against negligent parties exists, insurance companies pay losses without the right of reimbursement. Upon payment of a loss to the obligee, however, bonding companies are entitled to full reimbursement from the principal, although in practice this right often proves of little advantage.

The Folly of Personal Suretyship to the Bondsman.References to the practice of bonding date back to very ancient times, but until recently the bonds were signed by individuals, usually without compensation and as a matter of friendly accommodation. The Book of Proverbs makes frequent reference to personal suretyship, and always in a warning sense. Thus in Proverbs 6:1: "If thou be surety for thy friend, if thou hast stricken thy hand with a stranger, thou art snared with the words of thy mouth"; Proverbs 11:15: "He that is surety for a stranger shall smart for it; and he that hateth suretyship is sure"; Proverbs 17:18: "A man void of understanding striketh hands, and becometh surety in the presence of his friend"; and Proverbs 22:26: "Be not thou one of them that strike hands or of them that are sureties for debts. If thou hast nothing to pay, why should he take away thy bed from under thee?"

The truth of these admonitions cannot be emphasized too strongly. Too often the bondsman, when signing a bond for a friend, assumes that he is only guaranteeing that friend's honesty, whereas the obligation may extend to the proper performance of duties and thus also involves the hazards of carelessness, neglect, ignorance of the law or other incapacity, or lack of financial strength. But even where character is the only factor involved, it is well to bear in mind, as has been said, that : "Honesty, like time-tables, is subject to change without notice. Men who have been faithful for years suddenly yield to temptation and fall, and the bondsman is called upon to make good the loss-perhaps at great sacrifice.' When signing a bond, the bondsman impairs his financial credit by assuming a hazardous contingent liability. Perhaps the greatest drawback of personal suretyship is its lack of supervision over the conduct of the person bonded. It does seem strange indeed that individuals should assume such risk without the thought of compensation. One writer makes the interesting comment that: "There is no other branch of insurance where an incorporated company must compete with an individual for a certain piece of business, the company charging a proper and adequate fee for its service and handling the matter on a business basis, and the personal surety performing the service without the hope of fee or reward." 3

Advantages of Corporate Suretyship to the Principal and Obligee. Not only does corporate bonding relieve individuals, who are reluctant to impair their financial credit with a contingent liability, of the unpleasant task of declining to accommodate friends or relatives, but it extends to both principal and obligee numerous benefits

'Ernst A. Robbin in lecture on "Fidelity and Surety Insurance" before the Dallas School of Commerce.''


that cannot possibly be secured through personal suretyship. In fact, with corporate surety bonds available at comparatively small annual premiums, it is unfair and most unbusinesslike for any one requiring a bond to ask a friend to encumber his property and jeopardize his estate by way of a gratuitous accommodation. As one writer puts it: "Where is the man who would think of asking his neighbor or friend to insure him against financial loss by reason of fire, accident, health or death? The same principle should always apply to surety. Why should you ask your friends to insure your honesty, your judgment, your calculations, your finances or your chances of winning a law-suit." 4

Reference should be made to the following nine benefits of corporate suretyship, the first four pertaining to the principal, the last three to the obligee, and the fifth and sixth to both of these parties:

(1) Persons requiring bonds are relieved of the necessity of requesting accommodation from their friends, thereby often placing themselves in a position where they. are morally bound to reciprocate the favor when the opportunity offers.

(2) Public officials, bank and corporation officers, contractors, employees and other principals are freed from the likelihood of undue influence being exercised over them by those who accommodated them as sureties.

(3) Many persons of integrity are enabled to assume positions of trust, although they are without friends or property.

(4) Heirs and next of kin may become trustees, executors and administrators of the estates of their deceased relatives, although they might not otherwise be able to qualify as such. Management of the estate can

L. C. Reynolds in "Rough Notes," September, 1920, p. 17.

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