Insurance is one of the few contracts the law refuses to let parties extend on credit. In The New India Assurance Company Limited v. M/s Louis Dreyfus Commodities India Pvt. Ltd., Civil Appeal Nos. 7687–7688 of 2025, 2026 INSC 876, decided on 18 August 2026, a Bench of Justices Sanjay Karol and N. Kotiswar Singh applied Section 64VB of the Insurance Act, 1938 to a marine cargo turnover policy and held that where the insured’s turnover had already exhausted the sum insured before the loss, and the additional premium was paid only weeks after the fire, there was simply no cover in force on the date of loss.
A fire, a turnover ceiling, and a late premium
The insured, a commodities trader, held a Marine Cargo Annual Turnover Policy for the year 2010 with a sum insured of ₹1,200 crore, premium payable in two instalments. Business ran ahead of the estimate: by mid-July 2010 the insured’s turnover had already crossed ₹1,200 crore. On 7 November 2010 a fire at a container freight station destroyed over 41,000 cotton bales; the insurer’s own surveyor assessed the loss at just over ₹22 crore. The additional premium for the enhanced turnover was paid only on 17 December 2010 — nearly six weeks after the fire.
The insured relied heavily on an email of May 2010 from the insurer’s Divisional Manager, responding to a broker’s query, which stated that all transits were covered till expiry of the policy even if turnover crossed ₹1,200 crore. The NCDRC accepted that assurance and allowed the claim in 2025. The Supreme Court reversed.
The statutory embargo
Section 64VB(1) of the Insurance Act, 1938 provides that no insurer shall assume any risk unless and until the premium payable is received in advance or is guaranteed or deposited in the prescribed manner. The Court treated this not as a term of the contract but as a boundary on the insurer’s own capacity: an insurer is forbidden by statute from carrying a risk for which premium has not been received or secured. Once the declared turnover was exhausted, the risk on the excess was a fresh risk — and it was for the insured to extend cover by paying, or at least guaranteeing, the additional premium based on its estimated turnover before the loss, not after it.
The email that could not bind
Justice Kotiswar Singh, concurring, examined the Divisional Manager’s email through the law of agency under the Indian Contract Act, 1872. An officer’s usual authority to communicate with the insured, explain the policy and call for premium does not extend to creating a new risk or enlarging the sum insured contrary to statute and to the company’s internal guidelines, which permitted premium adjustment on turnover policies only downwards precisely because of Section 64VB. The email remained relevant as a contemporaneous representation about policy administration, but it could not lawfully do what the statute forbade.
The estoppel argument failed for the same reason. The insured said the insurer, having demanded and accepted the additional premium in December, was estopped from denying cover. The Court reiterated settled law that there is no estoppel against a statute: acceptance of premium after the loss created cover prospectively from the endorsement date and could not retrospectively insure a loss that had already happened.
Lessons for policyholders and their advisers
For businesses holding turnover-linked or declaration-based policies, the decision is a caution worth acting on. Turnover should be monitored against the sum insured through the policy year, and the insurer approached for enhancement before the declared figure is crossed — with the additional premium paid or formally guaranteed at that point. Comfort letters and emails from branch or divisional officers, however categorical, are not a substitute; the only cover that exists is the cover premium has been paid for. For insurers, the ruling confirms that repudiation on Section 64VB grounds survives even sympathetic facts and a substantial assessed loss.
Claims of this kind travel through the consumer fora — here the NCDRC — or civil and commercial courts, and the judgment will now govern how far correspondence with an insurer’s officers can be relied upon in such proceedings. The statute, not the correspondence, defines the risk.
Frequently Asked Questions
What does Section 64VB of the Insurance Act provide?
That no insurer shall assume any risk in India unless and until the premium payable is received in advance, or is guaranteed or deposited in the manner prescribed. It is a statutory embargo: cover does not attach on promises, correspondence or later payment; it attaches when the premium for that risk is actually paid or secured beforehand.
What is an annual turnover policy and why did it matter here?
It is a marine cargo policy where the sum insured is pegged to the insured's expected annual turnover, with premium paid on that estimate. In this case turnover crossed the insured figure of ₹1,200 crore months before the fire. Once the declared turnover was exhausted, cover for the excess required additional premium in advance — which had not been paid when the loss occurred.
Can an insurance company's officer extend cover by letter or email?
No. The Court held that a Divisional Manager's email assuring continued cover could not create or enlarge a risk contrary to Section 64VB. An agent's usual authority to explain the policy and collect premium does not include authority to bind the insurer to a risk the statute forbids it from assuming.
Does accepting premium after a loss revive the claim?
No. The insurer's acceptance of the additional premium after the fire operated prospectively from the date of the endorsement. Estoppel cannot be set up against a statute, so the insured could not rely on the later acceptance to claim cover for a loss that predated the payment.