General Average
General Average is an ancient principle of maritime law under which, when a sacrifice or extraordinary expense is made to save a ship and its cargo from a common peril, the loss is shared proportionally by all parties with an interest in the voyage — every cargo owner, plus the shipowner — not just the one whose goods were sacrificed.
The classic case: to save a vessel in danger, some cargo is jettisoned or a ship is deliberately grounded, or salvage and towage costs are incurred. Under general average, the value of that sacrifice and expense is spread across everyone according to the value of their cargo and the ship. It is declared by the shipowner, adjusted by a professional "average adjuster" under the York-Antwerp Rules, and can require cargo owners to post a general average bond or guarantee (usually via their cargo insurer) before they can collect their goods. This is a major reason marine cargo insurance matters — an uninsured owner can face a large, unexpected general-average contribution.
General average can hit a cargo owner with a surprise bill — sometimes large — for a casualty that never touched their goods, and can hold their cargo hostage until security is posted. It is one of the strongest practical arguments for marine cargo insurance, which steps in to post the security and pay the contribution. Every importer should understand it.
What triggers general average?
An extraordinary sacrifice or expense — jettison, salvage, deliberate grounding — made to save the ship and cargo from a common peril.
Why does general average require insurance security?
Cargo owners must post a bond or guarantee (usually via their insurer) to reflect their share of the loss before their goods are released.