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Archive by Month: February 2019

SURETIES ARE NOT FIDUCIARIES

By Gregory R. Veal February 1, 2019 Articles

Sureties are not fiduciaries. This bedrock concept should be as solid as “suretyship is a tri-partite relationship” and “the surety’s duties can be no greater than its principal’s.” A fiduciary must elevate its beneficiary’s interests above anyone else’s, including its own. How can a surety be a fiduciary when it necessarily owes duties to principal and to obligee/claimants, whose interests clearly conflict? Often indemnitors will insist on defending, and even claiming, against sureties based on alleged breach of fiduciary duty. The theory crops up especially when a surety exercises its right, under the general indemnity agreement, to settle its principal’s affirmative claims. Efforts to apply fiduciary duties to sureties continue to fail almost everywhere, including – just nine days ago - the Louisiana federal court.  

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