In the 1936 case of Morley Construction Co. et al v. Maryland Casualty Co., the U.S Supreme Court ruled in favor of Morley Construction Company, overturning a decision by lower courts. The dispute arose when Maryland Casualty Company refused to pay for damages incurred during construction work performed by Morley on a building owned by third-party, A.Hamburger & Sons Inc., arguing that their insurance policy did not cover such damages. The Supreme Court held that under the terms of its contract with Hamburger & Sons, and as per California law at that time, Morley was considered an "independent contractor" rather than an "agent". Therefore, any damage caused due to negligence or otherwise during construction fell within the purview of risks covered under Maryland's liability policy issued to Hamburger & Sons Inc.. Thus, it was obligated to indemnify (compensate) for losses suffered due to accidents occurring on site.

In the dissenting opinion for Morley Construction Co. et al. v. Maryland Casualty Co., Justice Cardozo disagreed with the majority's interpretation of the insurance policy in question, arguing that it should be read as a whole and not piecemeal. He contended that when viewed holistically, it was clear that the insurer had intended to cover all risks inherent in construction work, including damage caused by defective materials or poor workmanship - which were excluded from coverage under the majority's reading of individual clauses within the contract. Furthermore, he argued against what he saw as an overly literal interpretation of certain phrases within these clauses; instead advocating for a more contextual understanding based on common usage and industry norms at time of drafting.