In the case of Security Mutual Life Insurance Company v. Prewitt, Insurance Commissioner of Kentucky in 1905, the Supreme Court ruled on a dispute between an insurance company and a state regulator. The Security Mutual Life Insurance Company was based in New York but had policyholders in Kentucky. When it decided to withdraw from doing business in Kentucky, it made arrangements for its policies to be assumed by another insurer. However, the Kentucky insurance commissioner objected and demanded that Security Mutual maintain reserves for these policies as if they were still active. The court sided with Security Mutual, ruling that once an insurer has legally transferred its obligations under a policy to another company and is no longer liable for any claims arising from those policies, it should not be required to continue maintaining reserves against them. This decision clarified how reserve requirements apply when insurers transfer their liabilities through reinsurance or assumption agreements.

In the dissenting opinion for Security Mutual Life Insurance Company v. Prewitt, it was argued that Kentucky's insurance laws were not in violation of the Fourteenth Amendment or the commerce clause of the Constitution. The justice contended that states have a right to regulate businesses within their boundaries and protect their citizens from potentially harmful business practices. They believed that requiring out-of-state insurance companies to deposit bonds with state officials as a condition of doing business did not infrally upon these rights but rather served as a reasonable regulation designed to ensure financial stability and consumer protection. Furthermore, they disagreed with the majority's interpretation of "privileges or immunities," arguing instead that this phrase should be understood more broadly to include economic activities such as conducting an insurance business.