Addition of Practice Recommendation - General Average
Practice Recommendation 16 has been issued as set out below.
The text highlights the need for Members to notify the Association and keep it updated in relation to General Average events and adjustments.
Should any Members have any queries then please contact the Managers.
Practice Recommendation 16 – General Average
The Association’s covered risks (under Rule 2(3)(h)) include claims, disputes or proceedings relating to the entered ship concerning:
“General and/or Particular Average contributions or charges”.
A General Average (“GA”) contribution arises from a loss borne by a party to a maritime venture which arises in consequence of an extraordinary sacrifice made or expenses incurred (voluntarily and reasonably) at the time of a peril for the purpose of preserving a ship and its cargo. GA charges are the adjuster’s fees, valuation certificates, GA survey costs and any other out of pocket expense. Both GA contributions and charges are typically split, by an adjuster, between those parties with property or freight at risk by reference to values.
GA contributions and charges are commonly disputed by cargo interests. Usually such disputes turn on alleged breach of a contract of carriage and, typically, a failure to exercise due diligence in rendering the ship seaworthy at the commencement of a voyage. As P&I cover includes claims for unrecoverable GA contributions or charges in such circumstances, disputes relating to their recoverability also fall within the ambit of P&I cover and are excluded from the Association’s cover by virtue of Rule 4(5).
A Member may become involved in a recovery action for GA contributions or charges when there is no real dispute on liability or no defence raised which relates to an alleged breach of the contract of carriage. An example of the latter would be a dispute concerning the quantum of a contribution or charge, or the recovery or enforcement of undisputed but unpaid GA contributions (where there is no allegation of lack of due diligence). Such disputes fall within the Association’s cover.
However, often GA adjustments are only issued many years after a GA incident. A statement from an adjuster or lawyer that an amount of fees incurred falls for the account of “defence interests” is not determinative of the Association’s commitment; such claims should be dealt with in the normal way e.g. by reference to timely notification to the Association, which should be kept properly appraised to permit a staged approach to support on a merits basis as per Rule 3(4). Any commitment to costs must remain proportionate given the amounts in dispute and steps should be taken by the Member to ensure that other insurers (e.g. loss of hire, hull & machinery, P&I and GA absorption underwriters) are involved in incidents provoking a GA declaration and that they will pay appropriate fees as needed.
If the Managers are not appraised at an early stage of the possibility of a claim on the Association for costs arising out of a GA adjustment, or are not kept advised of material developments, this may impact the extent to which the Association can commit to such costs under Rule 5(5) and in line with Practice Recommendation 2 Conduct of Claims.