In the 1937 case of Wright v. Union Central Life Insurance Co., the U.S. Supreme Court ruled in favor of Union Central Life Insurance Company, affirming that it was within its rights to deny a life insurance claim on grounds of misrepresentation by the insured party. The plaintiff, Mrs. Wright, had filed a lawsuit against the company after it refused to pay out her husband's policy following his death from tuberculosis; she claimed that they were wrongfully denying her benefits due under contract law. The defendant argued successfully that Mr. Wright had knowingly misrepresented his health condition when applying for insurance coverage - he stated he did not have tuberculosis when in fact he did - and thus violated terms of their agreement which stipulated truthful disclosure as an essential element for valid coverage. The court agreed with this argument and held that such material misrepresentation constituted sufficient ground for rescission or denial of claims even if there was no deliberate intent to deceive on part of Mr.Wright.

In the dissenting opinion for Wright v. Union Central Life Insurance Co., Justice Benjamin Cardozo disagreed with the majority's decision to allow a life insurance policyholder to assign their benefits without notifying or obtaining consent from the insurer. He argued that this ruling would undermine contractual relationships and create uncertainty in business transactions, as insurers could no longer rely on knowing who they were dealing with when issuing policies. Furthermore, he contended that it was not unreasonable for an insurer to want some control over assignments of its policies, given that such transfers could potentially increase its risk exposure. Therefore, he believed that any restrictions on assignment should be deemed valid unless proven otherwise by statute or public policy considerations.