"GENERAL AVERAGE."

Auckland Star, Volume LIX, Issue 234, 3 October 1928, Page 4

"GENERAL AVERAGE."

WHAT IS IT? NOTABLE INSURANCE CLAUSE. DATES BACK TO ROMANS. "General average." What is it? If ten business men in Auckland were confronted with the above query it is safe to say that nine of thein would give a reply something like this: "General average! Oh, yes. Of course. It's an insurance term." "Yes, but what does it mean?" And the persistent questioner will elicit the fact / that the average business representative could not give a satisfactory answer. If a typical commercial man whose daily routine keeps him in fairly close touch with matters affecting the insurance of goods does not understand the phrase, it is scarcely reasonable to expect that that nondescript entity, the man in the street, would possess greater knowledge. Yet any person who travels by sea may be brought up with a round turn to find himself or herself affected by the insurance term known as "general average." When a person in ordinary commerce insures £200 worth of goods and pays £1 premium, he expects in the event of loss to collect £200 without any bother or'further call on hie funds. In shipping affairs the position :s not quite so simple. The £1 he pays gives a cover which is limited by the clause designated "general average." Before he can collect his goods or the monetary equivalent he must satisfy the conditions of that clause. This, as will be seen, severely curtails the scope of his cover should the carrying vessel meet disaster or threatened disaster. Pooling Arrangement. Actually the term "general average" is indefinite and has been arbitrarily brought into use to describe a usage whereby persona who conjointly use a ship to carry their goods agree to pool the risk of loss at Sea. Thus a ship may be chartered and •loaded with £5000 worth of timber on the dock and £5000 worth of general cargo under the hatches. A storm at sea threatens the. Joss of the vessel with all hands and all cargo. The captain, using i his judgment, for the benefit of all, ■jettisons the timber and is then able to ■struggle to port with the balance of the cargo undamaged. In that event under the principle of "general average," the ' consignees of the cargo that was saved pay a pro rata share of the portion that , was sacrificed for the general good. In formal language, but with rare clarity and completeness, Maclachlan's Law of Merchant Shiping states the position thus:— Combined Adventure. "The law relating to general average regards ship and cargo together as one combined. adventure, comprising a variety of interests all exposed to the perils of the sea, and equally concerned under a common danger in the awarding of a total loss.; and it prescribes, in case of sacrifice of part for the preservation of what remains of the common adventure, that -the loss-accruing by reason of the sacrifice shall be assessed upon the value of what remains, together. with the value of the thing sacrificed in. prder to recoup the loser and place him once more on a footing with his co-adventurers." And again— "General average is an indefinite phrase used in practical life to denote three things which are very distinguishable each from the other, namely, the act of making the sacrifice, the loss sustained as the direct consequence of that act and the contribution levied on the adventure to recoup the loser." The Port Napier. The recent damage which accrued to . the B.s. Port Napier when a few hours out from- Pago Pago has brought home to large numbers of Aucklanders, if not the meaning of the term "general average," at any rate the manner in which it operate*. The explosion of some ammonia cylinders' on board threatened the vessel with total destruction, and to prevent a total loss the captain ordered the pumps to be used. Thousands of tons of water were hurled into the shelter deck. The vessel was saved, but of the contents of the five hatches confprising the main •a; cano,' those in No. 4 were badly damaged, ana those in. No. 5 partially so. Numbers 1, 2 §nd 3 escaped; almost entirely. Much to the surprise of hundreds of consignees who had not studied'their marine insurance policy conditions, they found it. im- ' possible 1 to get delivery of their goods , from thd undamaged hatches until they had given a. satisfactory bond to meet a -pro rata claim based on the "gflnefal average" clause. As the total loss approaches £30,000, the allocafion" is-approximately 30 per cent, of c.i.f. and e. cost of ■ their goods. " . ' • A Great Shook. .To many this lias come as a-great shock, • and particularly to private persons, who may have had luggage Insured as a special precaution, but who possessed no know--1 ledge of maritime customs, ' A passenger, carrying a few trunks in his cabin does not come under the operation of the clause; but once' "his goods, i find a place on the ship's manifest, whether insured or not; they are subject to the provisions of "general average." He lias to pay the thirty per cent already referred to before he can obtain bis property or even have it inspected by the v iifetoms officers.' True, there may be a refund later on. It may be that when the average" adjusters have completed their investigations, it will be found that * 20 per cent levy will cover the total ' , w = lch case a 10 per cent rebate n™* mad l" That final adjustment may, be made for cwelve months >r eighteen months hence, as thj work of investigation is extraordinary, involving .nquines in various parts of the world "rttions. a ' C ° Untß a % Enumerable reals-' It only remains to be adtWl usage of general average in maritime bSriiiess has the force of law in GrpnV i.u those who have had an minder of the existence of this ob£tion may find some consolation in learning thJ! the practice h». the »„««,„ TSSISSt ,t years. As far back as the time of the tomans, the principle was first adootwl Introduced and justified by expedieiicv s unknown except in connection with 1 aring adventure. Its ultimate justification is that no insuance or shipping organisation could bv he . application of ordinary business •rinciples, accept full liability for all the losses that may occur at Sea. In ' connection with the necessary orniu'las that have to be gone through in 'he assessment of "general average !! Boyd's" forms are virtually in universal use.