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General Average Overview Part 3 Eric Nicholls Director Nicholls Insurance Consulting October 2013
Zurich Insurance
General Average - Overview PRESENTATION FOR ZURICH AUSTRALIA INSURANCE LIMITED
What Is General Average? Any extraordinary sacrifice or expenditure Intentionally, reasonably made or incurred for the common safety for preserving from peril property involved in a common maritime adventure.
History Of GA From Rhodian Law of 2,500 years ago It is provided by Rhodian Law that where merchandise is thrown overboard for the purpose of lightening a ship, what has been lost for the benefit of all must be made up by the contribution of all.
International Uniformity 1860 movement for uniformity to prevent confusion and injustice requires the same principles acknowledged amongst the chief maritime nations. York Antwerp Rules 1864.
Through a period when each of the maritime nations developed its own laws, to modern times and universal acceptance of a common international code the York/Antwerp Rules.
York Antwerp Rules YAR not a convention Incorporation by reference in Contract of Affreightment.
Assume that at time of the accident the value of property at risk was VALUE AUD SHIP CARGO A CARGO B CARGO C CARGO B WAS JETTISONED 20M 10M 20M 30M 80M 20M VALUE SAVED 60M
Loss of Cargo B adjusted as follows?? Values AUD SHIP 20M pays 6.67 CARGO A 10M pays 3.33 CARGO C 30M pays 10.00 60M pays 20M CARGO B jettisoned 20M pays _ 80M pays 20M
General Average adjusted Values AUD No Yes SHIP 20M pays 6.67 5.00 CARGO A 10M pays 3.33 2.50 CARGO C 30M pays 10.00 7.50 60M pays _ 15.00 CARGO B jettisoned 20M pays _ 5.00 80M pays 20M Everyone whose property had been at risk sustained the same degree of loss i.e. 25%
External Features Of GA PERIL MARITIME EXTRAORDINARY INTENTIONAL / VOLUNTARY INTERESTS
General Average Loss and General Average loss takes the form of: SACRIFICE - loss or damage to physical property Eg: jettison or cargo / extinguishing fire / damage to vessel s machinery in refloating EXPENDITURE - for the purchase of services Eg: port of refuge expenses, refloating costs.
Examples SACRIFICE Ship: Refloating damage Fire extinguishing damage Cargo: Jettison Fire extinguishing damage
Examples EXPENDITURE Lightening grounded vessel Entry to Port of Refuge Handling cargo to do repairs Detention expenses during repairs
SHIP CARGO GA FREIGHT CONTAINERS TIME CHARTERERS BUNKERS
Basis Of Contribution GA Sacrifices / Expenditure are apportioned over Net Arrived Values at destination
GA Security BOND (Receiver) AVERAGE GUARANTEE (Insurer) or CASH DEPOSIT (Receiver) Non Separation Agreement (Transhipment) where necessary
GA Adjustment - How and Where Average Adjuster needs to be appointed Terms set out in contractual agreement Charter Party and / or Bill of Lading incorporates York Antwerp Rules and place where GA to be settled The GA mechanism functions irrespective of fault or breach of contract Legal arguments occur later.
Benefits Of GA Universally accepted In major casualties the sharing of costs can prevent abandonment York Antwerp Rules Rule D Rights and Defences Not prejudiced: arguments take place after the voyage.
Provision GA security Casualty occurs and General Average declared Shipowner instructs General Average Adjuster Insurance Company rated S&P A or above Yes CARGO INSURED Cargo Receiver to sign Average Bond (AB) No Average Guarantee (AG) signed by Insurer Average Adjuster authorises release of cargo Cash Deposit from Receiver AG and AB required to release cargo Cash Deposit and AB required to release cargo
GA Security & Procedures MV MARINE FORUM Voyage: US load ports to Australian discharge ports Cargo: General (1,000 Bills of Lading) in Containers 1 st July Grounding. Damage noted leaking in No s 1 & 2 hols. Salvage signed under LOF agreement. Forced discharge of cargo. Jettison of part cargo required. Bunker tank breached. 1 st August Vessel and Cargo successfully refloated. Vessel and Cargo towed to Singapore as Port of Refuge. 1 st September Forced discharge of cargo. Vessel drydocked. Temporary and Part Permanent repairs effected; for both Grounding and Refloating damages sustained. Cargo reloaded after docking. 1 st November Vessel and cargo arrive at destination. Discharging of cargo. Permanent repairs completed to the vessel re Grounding damage sustained.
A) When the Casualty Occurs Obtain details of casualty from the Master Appoint / consult Average Adjuster Inform Hull Underwriters and P&I Club Assess the situation, identify the options and make decisions Inform Cargo Interests
C) Prior to Arriving at Destination Why is a GA security required? What form of GA security is required? Average Bond ( and commercial invoice) & Average Guarantee or Cash Deposit
E) GA Adjustment & Apportionment GA Values (AUD) The SHIP Sound Market Value 20,000,000 Deduct: Damage 5,000,000 GA Contributions 15,000,000 Add: Made Good 1,500,000 The CARGO Arrived value in Sound or Damaged condition Add: Made Good 12,000,000 500,000 12,500,000 16,500,000 1,925,000 1,458,333 CONTAINERS Valued at TOTAL NET CONTRIBUTORY VALUES 1,000,000 116,667 30,000,000 3,500,000
HOW TO MINIMISE COLLECTION FROM CONCERNED IN CARGO
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