In the 1926 case of Palmetto Fire Insurance Company v. Conn, the United States Supreme Court addressed a dispute over an insurance claim following a fire at a cotton warehouse in South Carolina. The plaintiff, Mr. Conn, had taken out an insurance policy with Palmetto Fire Insurance Company for his stored cotton but when he filed a claim after it was destroyed by fire, the company refused to pay on grounds that there were misrepresentations and concealment of material facts in obtaining the policy which voided their obligation under contract law. The court ruled in favor of Mr.Conn stating that while some inaccuracies existed within his application for coverage (such as incorrect estimation of quantity), they did not constitute fraudulent intent or materially affect risk assumed by insurer hence could not be used to deny payment on valid claims made under such policies.

In the dissenting opinion for Palmetto Fire Insurance Company v. Conn, it was argued that the majority's decision to uphold a South Carolina law requiring out-of-state insurance companies to deposit securities with state officials before doing business in South Carolina violated the Commerce Clause of the U.S. Constitution. The dissenting justices believed this requirement placed an undue burden on interstate commerce and gave preferential treatment to local businesses over their out-of-state counterparts. They contended that such protectionist measures were not within a state's rights under federalism principles and could potentially lead to economic retaliation from other states, thereby disrupting national unity and harmony among states.