Have you ever thought about the possibility that your cargo, even if it arrives safely, might still leave you responsible for sharing the costs of others’ losses and the expenses of rescuing a ship in danger.
In maritime transportation, the risk isn’t limited to your cargo alone. When a ship is imperilled, the expenses for saving it must be shared proportionally among the cargo owners and the ship owners/charterers. This principle is what we call General Average.
General Average essentially means „general loss.” This doctrine is rooted in the idea of equitable risk-sharing, encapsulated by the phrase from the Digest of Justinian Code 533 AD: “𝘞𝘩𝘢𝘵 𝘪𝘴 𝘨𝘪𝘷𝘦𝘯 𝘵𝘰 𝘦𝘷𝘦𝘳𝘺𝘰𝘯𝘦 𝘴𝘩𝘰𝘶𝘭𝘥 𝘣𝘦 𝘤𝘰𝘯𝘵𝘳𝘪𝘣𝘶𝘵𝘦𝘥 𝘵𝘰 𝘣𝘺 𝘦𝘷𝘦𝘳𝘺𝘰𝘯𝘦.”
In brief, a common voyage (common adventure) = a common loss.
There are 5 critical conditions that must be met for a sacrifice or expenditure to qualify as General Average:
1. Common Adventure: All parties must be participating in commercial activities, not just the salvage operation.
2. Common Safety: The action must be intended for the safety of all involved.
3. Voluntary Act: The sacrifice or expenditure must be made intentionally and not by accident.
4. Extraordinary Nature: The sacrifice or expenditure must be out of the ordinary.
5. Reasonableness: The extraordinary act must be reasonably made under the circumstances.
These principles are detailed in the York Antwerp Rules 2016.
And here’s some great news for shippers: having marine cargo insurance means you don’t need to worry about General Average. Even the most restricted coverage, ICC (C), fully covers General Average.
Logistics operators should be aware that Carrier Liability not equal General Average responsibilities. The logistics companies should not pay on behalf of the shipper GA expenses in order cargo would be released by salvors.
Let’s simplify logistics risk together!
At Sureforth Insurance Consultancy, we help logistics, shipping companies and cargo owners navigate the complexities of logistics company liabilities, and cargo in transit insurance. With our deep industry expertise, we simplify the complex to ensure your business operates confidently and securely.
We’re here to help. Whether you have a specific question about our services or need guidance on your logistics and insurance challenges, feel free to reach out.
