A surety, before making payment, may demand security from the principal obligor to guarantee his reimbursement when:
(1) The surety is sued by the creditor;
(2) The principal obligor is insolvent, unless the principal obligation is such that its performance does not require his solvency;
(3) The principal obligor fails to perform an act promised in return for the suretyship; or
(4) The principal obligation is due or would be due but for an extension of its term not consented to by the surety.
The principal obligor may refuse to give security if the principal obligation is extinguished or if he has a defense against it.
Acts 1987, No. 409, §1, eff. Jan. 1, 1988.