In the 1940 case of Continental Assurance Co. v. Tennessee, the U.S Supreme Court ruled in favor of Continental Assurance Company (CAC). The state of Tennessee had imposed a tax on CAC's premiums from policies issued to residents outside the state but secured by property within it. The court held that this taxation was unconstitutional as it violated due process and commerce clause protections under the Fourteenth Amendment. It reasoned that insurance is not an article of commerce, thus states cannot regulate or tax transactions occurring entirely beyond their borders even if they have some indirect connection with in-state properties.

The dissenting opinion in the Continental Assurance Co. v. Tennessee case argued that the majority's decision was inconsistent with previous rulings of the Court and violated principles of federalism by allowing a state to tax an out-of-state corporation based on its nationwide income, rather than just its income within that state. The dissent contended this approach unfairly burdened interstate commerce and could lead to multiple taxation if other states followed suit. It also pointed out that such a method for calculating taxes did not accurately reflect the company's activities or presence in Tennessee, thus violating due process rights under the Fourteenth Amendment.