The U.S. Supreme Court case Mutual Reserve Fund Life Association v. Phelps in 1902 revolved around a dispute over an insurance policy claim. The plaintiff, Mrs. Phelps, was the beneficiary of her husband's life insurance policy from the Mutual Reserve Fund Life Association and sought to collect on it after his death. However, the defendant argued that Mr. Phelps had misrepresented his health condition when applying for coverage and thus breached their contract terms which led them to refuse payment on the grounds of fraudulence. The court ruled in favor of Mrs.Phelps stating that while there were discrepancies between Mr.Phelps' statements about his health at different times, these did not constitute fraudulent misrepresentation as they were not materially false nor intentionally misleading; hence could not be used as a basis for denying claims under an issued policy. This ruling set precedence by emphasizing insurers' responsibility to verify information provided during application processes before issuing policies rather than using post-claim investigations as means to avoid payouts.

In the dissenting opinion for Mutual Reserve Fund Life Association v. Phelps, Justice Harlan argued that the court majority had incorrectly interpreted New York law and overstepped its jurisdiction by interfering with state legislation. He contended that the insurance policy in question was a contract between two parties, subject to laws of the state where it was issued - in this case, New York. The majority's decision effectively nullified provisions of this contract which were legal under New York law at time of issuance. Harlan asserted that unless such contracts violated principles of justice or public policy, they should be upheld as valid agreements between consenting parties. Furthermore, he criticized his colleagues' willingness to reinterpret state laws based on their own perceptions rather than deferring to local courts' interpretations.