General Average Clause In Marine Cargo

Cargo Jettison

The General Average (GA) clause in marine cargo insurance refers to a principle in maritime law where all stakeholders in a sea voyage (such as the shipowner, Cargo Owners, and charterers) proportionately share any losses resulting from voluntary sacrifices of part of the ship or cargo to save the entire ship in an emergency. This principle ensures that the costs of extraordinary measures taken to protect the vessel and cargo are equitably distributed among all parties involved.

Key Points of General Average:

  1. Voluntary Sacrifice: The sacrifice must be intentional and made for the common safety of the ship and cargo. Examples include jettisoning* cargo to lighten the ship or incurring costs for repairs to continue the voyage.
  2. Common Peril: The situation must present a common danger to all parties involved in the maritime adventure, not just a particular interest.
  3. Successful Outcome: The sacrifice must result in the saving of the vessel and remaining cargo. If the ship is lost despite the sacrifice, GA does not apply.
  4. Proportionate Contribution: All parties (shipowner, cargo owners) contribute to the losses based on the value of their interests saved by the sacrifice. The contribution is usually determined through a process called “general average adjustment.”
  5. General Average Adjustment: This process is conducted by an independent average adjuster, who calculates each party’s share of the loss based on the values at risk. This includes assessing the value of the sacrificed goods and the saved goods.

Application in Marine Insurance:

  • Coverage: Marine cargo insurance policies typically include provisions for general average. This means the insurer will cover the cargo owner’s contribution to the general average loss.
  • Security: After a general average event, the shipowner usually requires a general average bond or guarantee before releasing the cargo, ensuring that all cargo owners will pay their share of the general average costs.

Practical Example:

If a ship encounters a severe storm and the crew decides to jettison part of the cargo to stabilize the vessel and prevent it from sinking, the resulting loss of cargo is considered a general average act. All cargo owners and the shipowner would then share the loss proportionately, based on the value of the saved cargo and the ship.

In summary, the general average clause is a fundamental aspect of maritime law and marine insurance, promoting fairness by distributing the burden of extraordinary sacrifices made for the common safety during a sea voyage.

*Jettisoning: In shipping, jettisoning can occur to lighten a vessel during a storm or when the ship is in danger of sinking. This can involve throwing cargo overboard to make the ship more buoyant or maneuverable.