Are Surety Agreements Insurance? Federal Courts Weigh in [The Legal Intelligencer]

When is insurance not insurance? According to both Merriam-Webster and Black's Law Dictionary, insurance is a "contract whereby one party undertakes to indemnify or guarantee another against loss by a specified contingency or peril." Under that definition, "insurance" would include surety agreements, where one party agrees to indemnify another party if a third party defaults on a debt or fails to perform on a contract. But not so fast. A recent Pennsylvania federal court decision dismissed a bad-faith claim against a surety, finding that a surety bond is not "insurance" in Upper Pottsgrove Township v. International Fidelity Insurance, No. 13-1758 (E.D.Pa. Oct. 2, 2013).

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