In the case of Merchants' Cotton Press and Storage Company v. Insurance Company of North America, 1893, the Supreme Court was asked to determine whether an insurance company could be held liable for damages caused by a fire that occurred in a cotton press owned by the plaintiff. The defendant had issued a policy insuring against "all direct loss or damage by fire" but claimed it was not responsible because the fire was started intentionally by an unknown third party. However, there were no exclusions mentioned in their policy regarding fires set deliberately. The court ruled in favor of Merchants' Cotton Press and Storage Company stating that unless specifically excluded from coverage within its terms, an insurance policy covering all direct losses or damages due to fire should include those resulting from arson as well.

In the dissenting opinion for Merchants' Cotton Press and Storage Company v. Insurance Company of North America, the justice argued that the majority's interpretation of the insurance contract was incorrect. He believed that it did not cover losses due to a fire caused by an employee’s negligence because such risks were not explicitly included in its terms. The dissenting justice also disagreed with how much weight was given to extrinsic evidence when interpreting ambiguous clauses in contracts, arguing instead for a more literal reading of contractual language. Furthermore, he contended that even if one accepted this broader interpretation of coverage under insurance policies, there should still be some limits on liability - particularly where negligent acts are concerned - otherwise insurers would essentially become guarantors against all possible loss or damage regardless of cause or circumstance.