In the case of German Alliance Insurance Company v. Hale, 1910, the U.S. Supreme Court ruled in favor of Hale and upheld a Kansas law that prohibited insurance companies from including clauses in their policies that limited liability for damages caused by fire if the insured property was used to store alcohol. The German Alliance Insurance Company had argued that this law violated its Fourteenth Amendment rights because it interfered with freedom of contract and deprived them of property without due process. However, the court disagreed stating that states have broad powers to regulate businesses within their borders for public welfare purposes under police power doctrine - even if such regulations interfere with private contracts or economic interests.

In the dissenting opinion for German Alliance Insurance Company v. Hale, Justice Oliver Wendell Holmes Jr., joined by Justices William R. Day and Willis Van Devanter, argued that the Kansas statute prohibiting insurance companies from including a clause in their policies limiting liability in case of total loss to three-fourths of actual cash value was unconstitutional. They believed it violated the Fourteenth Amendment's due process clause as it interfered with freedom of contract without serving any legitimate state interest. The justices contended that if an insurer wished to limit its liability and a policyholder agreed to such terms, then there should be no legal impediment preventing them from doing so. They also expressed concern about potential negative impacts on commerce if states were allowed to regulate contracts between insurers and policyholders too stringently.