In the case of Clay v. Sun Insurance Office Limited, 1959, the U.S Supreme Court ruled in favor of Clay. The dispute arose when a fire destroyed Clay's property and he filed an insurance claim with Sun Insurance Office Limited. However, his claim was denied on grounds that he had violated a policy condition by increasing the risk without notifying them - specifically, storing flammable liquids on his premises which were not disclosed at the time of taking out insurance coverage. The court held that while it is true that insurers can deny claims if there has been an increase in risk due to changes made by insured parties after policies have been issued; this only applies if those changes are material and substantial enough to affect potential losses from covered risks significantly. In this case, it was found that although Mr.Clay did store flammable liquids on his premises (which increased fire hazard), such storage didn't materially or substantially enhance overall risk because other more significant factors contributing towards fire-risk were already present and known to insurer at inception of coverage.

In the dissenting opinion for Clay v. Sun Insurance Office Limited, Justice Frankfurter disagreed with the majority's interpretation of a clause in an insurance contract. He argued that the court should not have interpreted it as covering losses from all types of water damage, but only those specifically mentioned in the policy (rain and snow). The justice believed that this broad interpretation was inconsistent with established principles of contract law which dictate that ambiguous terms should be construed against the insurer. Furthermore, he contended that by interpreting "water damage" to include flooding caused by a broken pipe within a building - something clearly outside its ordinary meaning - they were effectively rewriting rather than interpreting the contract. This approach undermined certainty and predictability in contractual relationships which are essential elements for business operations.