In the case of Hartford Accident & Indemnity Company v. Southern Pacific Company et al., 1926, the Supreme Court was asked to determine whether a railroad company could be held liable for damages caused by a fire that started from sparks emitted by one of its locomotives. The plaintiff, Hartford Accident & Indemnity Company, had insured several properties that were damaged in this fire and sought compensation from Southern Pacific Railroad under California's "Fire Statute," which made railroads strictly liable for any fires caused by their operations. However, Southern Pacific argued that this state law conflicted with federal laws regulating interstate commerce and was therefore invalid. The Supreme Court sided with the defendant, ruling that while states have some power to regulate railroads within their borders, they cannot impose regulations or liabilities that interfere with interstate commerce as governed by federal law. This decision established an important precedent regarding the balance between state and federal powers over transportation industries.

In the dissenting opinion for Hartford Accident & Indemnity Company v. Southern Pacific Company et al., Justice Stone argued that the majority's decision to allow a railroad company to limit its liability through contract was inconsistent with federal law and policy. He contended that such contracts undermine public interest by allowing railroads to escape responsibility for their negligence, which could lead to decreased safety standards in the industry. Furthermore, he disagreed with the majority's interpretation of previous case law on this issue, stating it had been misapplied in this instance. Justice Stone believed that these types of agreements should not be enforceable as they are contrary to statutory provisions designed specifically to protect shippers from bearing losses caused by carrier negligence or misconduct.