In the 1934 case of Mobley v. New York Life Insurance Co., the United States Supreme Court ruled in favor of New York Life Insurance Company, upholding their decision to deny a claim on a life insurance policy due to misrepresentation by the insured party. The plaintiff, Mrs. Mobley, had filed suit against the company after they refused to pay out on her late husband's life insurance policy because he failed to disclose his prior health issues during application process. The court found that Mr. Mobley’s failure to disclose his previous diagnosis and treatment for syphilis constituted material misrepresentation which justified denial of benefits under his life insurance contract with New York Life Insurance Company.

In the dissenting opinion for Mobley v. New York Life Insurance Co., Justice Stone argued that the majority's decision was inconsistent with previous rulings and principles of contract law. He contended that a life insurance policy is not merely an investment, but also provides protection against risk, which should be considered when interpreting its terms. In this case, he believed that Mr. Mobley had fulfilled his obligations under the policy by paying premiums until his death and thus, his beneficiaries were entitled to receive full benefits without deductions for loans taken out on the policy. The justice disagreed with the majority's view that loan provisions in such policies are designed to protect insurers from loss; instead, he saw them as providing additional flexibility for policyholders who may need access to cash during their lifetimes while still maintaining coverage for their dependents after death.