Underwriting Members of Lloyd's in Lloyd's Policy No. 52342 v. California Fruit Growers Exchange

During 1937 one Jones was in the employ of appellee Fruit Growers Exchange. Between May 1 and November 1 of that year, through Jones’ defalcations, Fruit Growers suffered a loss of $23,019.22. The United States Fidelity and Guaranty Com•pany had issued to the employer a fidelity bond, referred to in the record as the “primary bond,” limited in coverage to the sum of $1,000. This bond was in effect during the period of the defalcations. It contained no discovery clause, that is to say, it prescribed no time limit within which losses were required to be discovered in order to be claimable. The loss was discovered by Fruit Growers July 31, 1940, and the surety thereupon paid the full amount of the bond, namely $1,000.

Under date of November 1, 1936, Lloyd’s Underwriters issued to Fruit Growers an “excess” fidelity policy in the amount of *561 $25,000 insuring the employer against loss occurring during the period commencing with that date and ending with the 1st of November, 1937. Clause 4 of this bond provided: “It is further understood and agreed that this excess insurance is subject to all the terms and conditions of the said Primary Bonds [i. e., the primary bond above mentioned]…