In the 1937 case of State Farm Mutual Automobile Insurance Co. v. Coughran, the U.S Supreme Court ruled in favor of State Farm. The dispute arose when Mr. Coughran was injured in an automobile accident and sought compensation from his insurer, State Farm, under a policy that covered bodily injury caused by uninsured motorists. However, the driver responsible for causing the accident had liability insurance with another company which became insolvent before paying out any claims to Mr.Coughran or others involved in accidents caused by its insureds during this period. State Farm argued that since there was technically insurance coverage at the time of the accident (even though it didn't pay out), they were not liable for covering Mr.Coughran's injuries as he wasn't hit by an "uninsured motorist". The court agreed with this interpretation and held that even if an insurer becomes insolvent after issuing a policy but before satisfying claims arising from it, such drivers are still considered 'insured' under their policies at least until insolvency occurs.

In the dissenting opinion for State Farm Mutual Automobile Ins. Co. v. Coughran, it was argued that the majority's decision to uphold a jury verdict in favor of an insured party who had misrepresented his health condition on his insurance application was unjustified and set a dangerous precedent. The dissenting justices believed that allowing such misrepresentations to go unpunished would encourage dishonesty among policyholders and undermine the integrity of insurance contracts, ultimately leading to higher premiums for all consumers as insurers sought to protect themselves against increased risk. They also disagreed with the majority's interpretation of relevant state law, arguing that it did not support such leniency towards fraudulent behavior by insured parties.