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cargo insurance professionals, but the following overview
will explain how general average works and what you can
do to make sure you’re prepared for the worst.
ANCIENT PRACTICE IN A MODERN AGE
The concept of general average dates back nearly 3,000
years. In centuries-old maritime parlance, “average” refers
to loss, and “general” means that something is spread
among all parties, according to Richard W. Bridges, a vice
president with Roanoke Trade Insurance Inc., which specializes in international insurance solutions. Thus, general
average is a pooling of a financial loss by all parties involved
in an ocean voyage. (A variation is “particular average,” or
partial loss, which applies only to directly affected parties.)
More specifically, general average acts as a mechanism for
reimbursing the carrier for the extraordinary expenditures
or sacrifices it makes for the common good and safety of a
voyage, says Laura Otenti, a lawyer with the firm Posternak
Blankstein & Lund LLP. “In other words, losses incurred
for the common benefit of the participants in a maritime
voyage are paid proportionately by all who participate in
the voyage,” she says.
When would an ocean carrier declare general average?
Some examples include damage to the vessel caused by bad
weather, running aground due to navigational errors, or a
mechanical breakdown such as the loss of steering.
