General Average

F D Rose

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CHAPTER 7 Insurance Contracts

I Introduction

7.1 An assured is entitled to claim from his insurer an indemnity for an insured loss according to the terms of the policy. The fact that a person suffers a loss in consequence of a general average act does not mean that he will be able to recover in full from a single insurer, for: his entitlement to claim will be governed, not only by the general law, but in particular by the terms of the policy; and provision may be made for different losses by different insurance contracts. 7.2 For present purposes, the types of loss generally recoverable under insurance contracts may be divided into three groups.1 First, the loss may be one of the losses specifically insured under the policy, albeit one in respect of which the insured (and, by subrogation, his insurer) may be entitled to claim contribution from interests benefiting from the loss. This group includes general average sacrifices and expenditures. 7.3 Secondly, the insured may not suffer from the general average act but benefit from it, in which case he will come under a liability to contribute in general average; the contribution for which he is liable may also be indemnifiable by his insurer. 7.4 Thirdly, the loss may result from steps taken to avert or minimise an insured loss for which the insured is entitled to recover an additional indemnity under suing and labouring provisions.2 Standard hulls and cargo clauses require the assured to take steps to avert or minimise insured losses, in return for which the insurer agrees to indemnify the assured for charges properly and reasonably incurred.3 Recovery under the duty of assured (sue and labour) clause generally contains specific exclusion of general average and salvage charges. Thus, in its more recent form, the standard clause stipulates4 that

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“General average, salvage charges (except as provided for in [the case of total loss of the vessel]5), special compensation and [related expenses 6 ] and collision defence or attach costs are not recoverable under this [clause].” 7.5 Given the different types of risks and losses covered by different insurances, a practical consequence of general average situations is that there is not only competition between different interests involved in the common adventure (as claimants and as contributors) but it generally becomes necessary to demarcate the liabilities of different insurers (property insurers and liability insurers).

II Liability to Contribute Determined Independently of Insurance

7.6 In accordance with general principle, Gorell Barnes J stated in The Brigella 7 that:

the obligation to contribute in general average exists between the parties to the adventure, whether they are insured or not. The circumstance of a party being insured can have no influence upon the adjustment of general average, the rules of which … are entirely independent of insurance.

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