General Average.. what exactly is it?

Imagine a cargo ship full of containers on its voyage and something unexpected happens during the trip, anything from:

  • Theft of Goods
  • Loss or Damage
  • Sinking, Capsizing, Container dumping
  • Loading and Unloading incidents
  • Warehousing and storage issues
  • Fire

General Average is a principle of maritime law that essentially establishes that all sea cargo stakeholders (owner, shipper, etc.) evenly share any damage or losses that may occur as a result of voluntary sacrifice of part of the vessel or cargo to save the whole in an emergency.

A good example is if containers are dumped at sea to save a vessel, even if your container or cargo is safe and sound on the ship, you may still find yourself being asked to contribute towards the loss of another Shipper’s container. This is based on the principle that the other Shipper’s cargo was sacrificed to save not only the vessel, but your cargo as well.

Once a vessel owner declares General Average, a neutral third-party (the General Average adjuster) appointed by the vessel owner, will determine the applicable costs owed to and by each stakeholder involved in the vessel voyage. The adjuster will determine which losses qualify for General Average, total costs of the incident, as well as the amount each party owes, etc. 

Centuries of maritime law mean ship owners are able to pass the bulk of their risk on to the Shippers who use their service – This protects them and keeps cargo moving across the globe – Now you need to make sure as a shipper that you are protected too! By not taking out marine insurance you are taking the risk that the loss of your cargo worth thousands could end up costing you hundreds of thousands.

To find out more about Marine Insurance and how AvantiFM can assist you go HERE.