General Average

General average is a centuries-old maritime law principle that distributes losses equally among all parties with cargo on a vessel when a voluntary sacrifice is made to save the ship. If cargo is thrown overboard or a ship is intentionally grounded to prevent total loss, ALL cargo owners share the cost—even those whose cargo wasn’t touched.

How General Average Works

The Principle

• Sacrifice made for common safety
• All parties share the loss
• Based on cargo value
• Ancient maritime tradition

Example Scenario

Vessel catches fire at sea:
- Captain orders containers jettisoned
- 50 containers thrown overboard
- Ship and 450 containers saved

Result:
- Owners of 50 lost containers: Partial compensation
- Owners of 450 saved containers: Must contribute
- Ship owner: Also contributes

When General Average Is Declared

Qualifying Events

• Fire requiring cargo sacrifice
• Grounding to save the vessel
• Jettison (throwing cargo overboard)
• Equipment damage to save ship
• Salvage operations
• Extraordinary expenses for safety

Not General Average

• Normal voyage expenses
• Cargo damaged by rough seas
• Individual container damage
• Carrier negligence

The General Average Process

Step by Step

1. Incident occurs - Sacrifice made
2. GA declared - Carrier announces
3. Ship arrives - Cargo held at port
4. Security required - Before cargo release
5. Adjustment calculated - By average adjuster
6. Contributions collected - From all cargo owners
7. Settlement - Final distribution

Timeline

• Declaration: Immediately after incident
• Initial bond: Within days of arrival
• Full adjustment: 1-3+ years
• Final settlement: Can take years

General Average Security

What’s Required for Cargo Release

• General Average Bond (guarantee)
• Cash deposit (percentage of cargo value)
• Insurance guarantee (if insured)
• Carrier won’t release without security

Security Options

If You’re Uninsured

• Must post cash deposit
• Higher percentage required
• Cargo held until posted
• Could be substantial amount

Calculating General Average

Contributory Values

• Ship value
• Cargo value (all owners)
• Freight charges
• Total “venture” value

Contribution Formula

Your contribution =
(Your cargo value ÷ Total venture value) × Total loss

Example:
Your cargo: $100,000
Total venture: $50,000,000
Total loss: $2,000,000

Your share: ($100,000 ÷ $50,000,000) × $2,000,000
          = 0.2% × $2,000,000
          = $4,000

Role of Marine Insurance

Why Insurance Is Critical

• Insurer posts security for you
• Insurer pays your contribution
• No out-of-pocket costs
• Quick cargo release

Without Insurance

• You post cash deposit
• You pay contribution directly
• Cargo held until security posted
• Major cash flow impact

Insurance Coverage

Marine cargo insurance typically covers:
✓ Your cargo loss (if sacrificed)
✓ Your GA contribution
✓ GA security/deposit
✓ Legal/adjustment costs

Real General Average Examples

Ever Given (2021)

• Blocked Suez Canal
• Salvage costs enormous
• GA declared
• All cargo owners contributed

MSC Flaminia (2012)

• Fire and explosion
• Multiple casualties
• Extensive damage
• Complex GA settlement

Typical Declaration

NOTICE OF GENERAL AVERAGE
═══════════════════════════════════════

Vessel: [Ship Name]
Voyage: [Details]
Date of Incident: [Date]

General Average has been declared under
York-Antwerp Rules 2016.

All cargo interests must provide:
1. GA Bond
2. Cash deposit or insurance guarantee

Cargo will not be released until
security is received.

Average Adjuster: [Firm Name]
═══════════════════════════════════════

York-Antwerp Rules

What They Are

• International rules governing GA
• Voluntary but widely adopted
• Incorporated in bills of lading
• Standard calculation methods

Key Provisions

• What qualifies as GA sacrifice
• How contributions are calculated
• Settlement procedures
• Interest and commission rules

Protecting Your Cargo

Essential Steps

1. Always have marine insurance
2. Ensure policy covers GA contribution
3. Know your insurer’s GA process
4. Report incidents immediately
5. Cooperate with adjusters

Without Insurance

• Budget for potential deposits
• Understand you’ll share losses
• Consider self-insurance program
• Evaluate risk vs. premium cost

General Average Costs

What Cargo Owners May Pay

• Proportionate loss share
• Salvage contributions
• Legal/adjustment fees
• Interest during settlement
• Storage while cargo held