What is meant by general average and when does it occur?

When you hear about container vessels catching fire at sea or running a ground like the Ever Given in the Suez Canal, what do you think of?  

Not the triggering or consequence of general average (GA), I bet! 

In this article, we’re going to cover the following key points: 

• What general average is 
• When it occurs
• How it’s calculated
• It’s impact on your shipment
• The role of insurance

What is general average?

General average is a risk-sharing concept that applies when the losses sustained by some involved in a maritime accident are mitigated by those who suffer no loss. 

It's all about sharing risks and costs associated with uncertain events.

Who and what can trigger general average? 

A vessel owner can declare general average.  

It’s a principle of maritime law that gives a cargo ship owner a way to make safe a situation at the expense of some of the cargo, equipment or funds onboard. It’s classed as any extraordinary sacrifice or expenditure of cargo that is intentionally made. 

Example: Your ocean freight cargo is onboard a container shipping vessel and a fire breaks out. 

To deal with the fire quickly and make the situation safe, the ship’s captain must extinguish the fire without delay. General average law makes it possible for safety to be the first priority, placing its importance above everything else.  

So what general average does is it takes away the need to deliberate on whether the cargo put in jeopardy by a situation, like a fire, should or shouldn’t be spared.

Its purpose is actually one of fairness.  If your cargo must be sacrificed (sent overboard!) or is damaged, in order to save lives at sea or the majority of the other cargo aboard a vessel, you’d be compensated for your loss.  

Equally, if your shipping container remained safely on-board or unscathed, you’d be required to share the financial burden of those who lost their containers, in order to save yours.

How is general average calculated and how does it affect my shipment? 

It is really important to know that when general average occurs, the liability belongs to the cargo owner.  Not the ocean carrier who is transporting it and made the decision to trigger it. 

Once triggered, all cargo is seized and a third-party general average adjuster is brought in to assess and calculate the losses.

This can take months, even years!  

General average isn’t always included in your insurance policy so be sure to check your paperwork when you’ve finished this article.

Make sure you’re covered with Hillebrand Gori

If your beverages are insured with a Hillebrand Gori policy, you can grab a coffee instead – we’ve got you covered! 

As part of the Hillebrand Gori service, all our quotes include insurance. You can opt out at any time, with a written notification sent to the contact person at your local Hillebrand Gori office. 

Estimate your insurance price here and plan for the unexpected. Contact us for more information on what steps you need to take. Together, we can ensure that you’re fully protected from unexpected losses associated with maritime shipping.