Airlines Reporting Corp. v. United States Fidelity & Guaranty Co.

In this appeal we consider the scope of a surety bond issued by respondent United States Fidelity and Guaranty Company (USF & G) for the benefit of its obligee, appellant Airlines Reporting Corporation (ARC). The surety bond covered the default of the principal, a travel agency, when the agency failed to pay for airline tickets issued according to an agreement between ARC and the agency. On appeal, ARC contends that USF & G was obligated under the bond to cover the agency’s default in payment for all tickets issued and used, whether as a result of a sale or, as here, a theft by a third party. We disagree with ARC’s interpretation and affirm the judgment.

Background

ARC is an organization authorized by various member airlines to issue blank airline ticket forms to travel agents and to collect money owed the airlines for tickets issued to the public. In order to participate in this program, known as the “Area Settlement Plan,” a travel agent must be on ARC’s approved list. Once approved, the agent receives blank ticket stock and identification plates for the member airlines, which are used to validate tickets. Each agent must execute the agent reporting agreement (ARA),…