In the case of Northwestern Mutual Life Insurance Company v. Johnson, 1920, the U.S. Supreme Court ruled in favor of Northwestern Mutual Life Insurance Company (NMLIC). The dispute arose when NMLIC refused to pay a life insurance claim on grounds that the policyholder had misrepresented his health condition at the time he applied for coverage. The beneficiary sued NMLIC in Alabama state court and won; however, NMLIC appealed to federal courts arguing that it was incorporated under Wisconsin laws which allowed such refusal if misrepresentation occurred during application process - even if this fact wasn't directly responsible for death. The Supreme Court held that since insurance contracts are subject to laws of state where they're made unless otherwise specified by contract terms or necessary implication from them, Wisconsin law governed this policy as per its explicit provision stating so and thus protected insurer's decision not to pay out.

The dissenting opinion in the Northwestern Mutual Life Insurance Company v. Johnson case argued that the majority's decision was a departure from established principles of insurance law and taxation. The dissent emphasized that life insurance policies should be treated as contracts, not property, for tax purposes. They contended that treating them as property would lead to double taxation - once when premiums are paid and again when benefits are received - which is unjust and contrary to the intent of tax laws. Furthermore, they pointed out inconsistencies in how different types of insurance were being taxed under this new interpretation, arguing it created an unfair burden on policyholders who had purchased their policies with after-tax dollars. Finally, they warned against extending state taxing power too far into interstate commerce by allowing states to impose taxes on out-of-state insurers based solely on their contractual relationships with residents.