In the 1934 case of Metropolitan Casualty Insurance Co. v. Brownell, Receiver, the United States Supreme Court ruled on a dispute involving an insurance company's liability for losses incurred by a bank that had purchased bonds from it. The bank had gone into receivership and its receiver sued to recover money paid for bonds which were later discovered to be worthless due to fraud committed by their issuer. The insurer argued that they should not be held liable as they merely guaranteed against loss resulting from failure in title or defects in execution of the bonds but did not insure against fraudulent issuance or insolvency of the issuer. The court sided with the insurance company, ruling that under New York law (which governed this contract), insurers are only responsible for risks explicitly covered in their policies and could not be held accountable for any other types of risk unless there was clear evidence showing such intent within their policy terms. Therefore, since no provision specifically covering fraud or insolvency was included in this particular policy, Metropolitan Casualty Insurance Company was found not liable.

In the dissenting opinion for Metropolitan Casualty Insurance Co. v. Brownell, it was argued that the majority's decision to uphold a state law requiring foreign corporations to consent to being sued in local courts as a condition of doing business within the state was unconstitutional. The dissenting justices believed this requirement violated due process rights under the Fourteenth Amendment by forcing companies into an unfair choice: either surrender their constitutional right not to be sued outside their home jurisdiction or forfeit their ability to conduct business in other states. They contended that such laws could potentially lead to abuse and exploitation of foreign corporations, which would have no recourse but compliance if they wished to operate across state lines.