In the case of Merchants Mutual Automobile Liability Insurance Company v. Smart, the Supreme Court was asked to determine whether a clause in an insurance policy that limited liability for injuries caused by non-owned or hired automobiles violated public policy. The plaintiff, Smart, had been injured while riding as a passenger in his own car which was being driven by another person at the time of accident. His insurer, Merchants Mutual Automobile Liability Insurance Company refused to pay on grounds that their contract only covered accidents when he himself was driving his vehicle and not when it's driven by someone else. The court ruled against the insurance company stating that such clauses were indeed contrary to public policy because they could lead to situations where innocent victims would be left without compensation for their injuries simply due to who happened to be driving at the time of accident.

In the dissenting opinion for Merchants Mutual Automobile Liability Insurance Company v. Smart, the justice argued that the majority's interpretation of the insurance policy was incorrect and overly broad. The justice contended that under a proper reading of the contract, it did not cover damages incurred while driving in an intoxicated state as this would be against public policy. Furthermore, they believed that such coverage would encourage reckless behavior by insuring drivers against their own negligence or misconduct. They also disagreed with how broadly liability was assigned to include any person operating the car with permission from its owner regardless of whether they were named on the policy or not. This interpretation could potentially expose insurers to unlimited risk and create moral hazards where insured parties might allow irresponsible individuals to drive their cars knowing they are covered by insurance.