In the case of Ruhlin et al. v. New York Life Insurance Co., 1937, the U.S Supreme Court ruled in favor of New York Life Insurance Company (NYLIC). The dispute arose when NYLIC refused to pay a life insurance claim on grounds that there had been misrepresentation and fraud in obtaining the policy by not disclosing an existing illness at the time of application. The beneficiaries sued for recovery but both lower courts found in favor of NYLIC, stating that if full disclosure had been made about pre-existing health conditions, it would have affected their decision to issue a policy or altered its terms. On appeal, the Supreme Court affirmed these decisions noting that material facts were indeed concealed during application process which constituted fraud under Ohio law where contract was issued.

In the dissenting opinion for RUHLIN et al. v. NEW YORK LIFE INSURANCE CO., Justice Cardozo disagreed with the majority's decision to uphold a lower court ruling that denied recovery of insurance benefits to Ruhlin, whose policy had lapsed due to non-payment of premiums while he was mentally incapacitated. He argued that there should be an exception in cases where the insured is unable to act due to mental illness or insanity during the grace period provided for payment of overdue premiums, as it would be unjust and against public policy not to do so. According to him, such individuals are incapable of understanding their obligations under an insurance contract and therefore cannot be held accountable for failing them in these circumstances.