Opinion ID: 1058579
Heading Depth: 3
Heading Rank: 2

Heading: Language of the Bond

Text: Having resolved that Tennessee Code Annotated section 50-6-405(b) indicates that the liability of the sureties is limited to the face amount of the bonds, we finally turn to the language of the bonds. Some cases have relied primarily on interpreting the language of the bond at issue when determining whether the bond is of a single, continuous term or created cumulative liability. See generally State ex rel. Guste v. Aetna Cas. & Sur. Co., 429 So.2d 106 (La.1983); Fourth & First Bank & Trust Co. v. Fid. & Deposit Co. of Md., 153 Tenn. 176, 281 S.W. 785 (1926); Green v. United States Fid. & Guar. Co., 135 Tenn. 117, 185 S.W. 726 (1916). Although we have determined that the statutory bonds are construed in the light of the statute creating the obligation secured and we assume that the parties intended to comply with the requirements of the statute and nothing more, it is important to look at the language of the bond to see if the sureties assumed an obligation greater than that which is required by section 50-6-405. Aetna Cas. & Sur. Co. v. Woods, 565 S.W.2d 861, 864 (Tenn.1978). The language of the bonds only serves to confirm our conclusion that the liability created by the bonds is intended by both the legislature and the parties to be non-cumulative. Each bond states that: This Bond may be cancelled at any time by the surety upon giving thirty (30) days' written notice to the Commissioner of Commerce and Insurance of the State of Tennessee, in which event the liability of the surety shall, at the expiration of the said thirty days, cease and determine, except as to such liability of the principal on account of injury or death to any of its employees, as may have accrued prior to the expiration of said thirty days, it being understood that the surety shall be liable, within the penal sum mentioned herein, for the default of the principal in fully discharging any liability on its part accruing during the life of this obligation. The statutory form, provided by the Commissioner, [8] shows an effective date of the bond and does not state an expiration date. The form provides that the bond may be cancelled upon thirty days' written notice to the Self-Insurance Division. Although NAR paid premiums annually to the sureties, annual premiums do not make a series of contracts. See United States v. Am. Sur. Co. of N.Y., 172 F.2d 135, 140 (2d Cir.1949) (Swan, J., dissenting). The rider executed by USF&G and accepted by the Self-Insurance Division states: [I]n no event shall the aggregate liability of United States Fidelity and Guaranty Company on account of any and all act or acts exceed the larger amount [penal sum]. Clearly, the parties did not intend that the liability created by the surety bonds would be cumulative and instead intended the bonds to be of a single, continuous term with the maximum liability of the penal sum of the bonds. Therefore, the sureties did not assume an obligation which is greater than that required by section 50-6-405.