Understanding General Average in Marine Insurance: Insights from Expert Dilip Sinha
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Marine policies, both cargo and hull, mention not only the perils, but also the types of losses that are payable under the policy of assurance. ?
Cargo policies, are covered under ICC clauses. ICC A- 1.1.2009 provide cover against all risks of Physical loss or damage. The coverage is restricted by exclusions in the clause. ?
Hull insurance issued on Time basis is covered vide ITC Hulls 1/10/83, & the perils covered are listed under clause numbers 6 (6.1 and 6.2). ?
The types of losses covered are:?
We will limit ourselves to General Average here. GA is defined under Rule A of York Antwerp rules as:?
" There is a General Average Act when,?and only when,?any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure".?
The elements needed to establish GA are:?
1. Extraordinary act (expenditure or sacrifice)?
2. Should be an intentional act?
3. should be reasonable (and prudent)?
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4. for the Common safety?
5. to preserve from peril?
6. The Common Maritime adventure.?
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The Origin:?
General average formed part of the Rhodian Laws, based on the earlier custom and was in existence even before the origin of marine insurance. Lawrence J, has defined GA as “all loss which arise in consequence of extraordinary sacrifice made or expenses incurred for the preservation of ship & cargo comes within general?average, and must be proportionately borne by all who are interested.” (1801). The attributes of GA are, when an extraordinary expense or sacrifice is voluntarily & reasonably made or incurred in time of imminent peril for the purpose of preserving the property imperiled in the common adventure. MIA, 1906 Sec. 66(2). The party on which GA falls is entitled to a rateable contribution from all other parties interested, and such contribution is called GA contribution. S 66(3).?The interest made goods must also contribute.
?The common adventure must be in peril. The peril must be real and not imaginary, and it must be imminent. Where cargo was sprayed with water & foam on seeing smoke coming out from the hold, and subsequently at destination, no evidence of any fire was found, it was held that there was no GA sacrifice as it was arising out of a mistaken idea that the ship and cargo was in peril. (Joseph Watson & Sons Ltd Vs. Fireman’s Fund Insurance Co of San Francisco, 1922.). The sacrifice must be voluntary. The sacrifice or expenditure must be extraordinary in nature. The object must be nothing short of preservation of the property imperiled in the common adventure.?
Hence General Average is based on the equitable principle and I quote “That which is sacrificed for the benefit of all must be compensated by all.”