In the case of American Life Insurance Co. v. Reese Smith Stewart et al., 1936, the Supreme Court ruled in favor of the insurance company, reversing a lower court's decision that had favored policyholders who claimed they were entitled to dividends from their policies. The policyholders argued that under Kentucky law, they should receive dividends as members of a mutual life insurance company even though their policies did not explicitly provide for such payments. However, the Supreme Court found no basis in Kentucky law or any other state laws requiring an insurer to pay dividends unless it was specifically stated in the contract between parties (the insurance policy). Therefore, because there was no explicit provision for dividend payment within these specific contracts held by these particular policyholders with American Life Insurance Company, they were not legally entitled to claim them.

The dissenting opinion in the case of American Life Insurance Co. v. Reese Smith Stewart et al., 1936, argued that the majority's decision was a departure from established principles and practices regarding insurance contracts. The dissenters believed that an insurer should not be allowed to deny liability on a policy based on alleged misrepresentations made by the insured after they have accepted premiums for years without raising any objections or conducting investigations into these supposed misrepresentations. They contended that allowing such actions would create uncertainty and instability in insurance relationships, undermining public confidence in this important industry sector. Furthermore, they pointed out inconsistencies between state laws governing insurance contracts and federal law as interpreted by the majority, arguing for greater deference to state regulations designed to protect consumers against unfair practices by insurers.