General Average: The Cost Cargo Owners Miss

General average is the rule that when a ship's owner makes an extraordinary sacrifice or spends extraordinary money to save ship and cargo from a common danger, everyone whose property is saved shares the cost in proportion to its value. On a car carrier that means every consignee with vehicles still aboard after a fire, grounding or tow. Standard cargo insurance covers the contribution. Cargo that is self-insured or under-insured pays it directly.

How does general average work under the York-Antwerp Rules?

Almost every bill of lading applies the York-Antwerp Rules, most recently revised by the Comité Maritime International in 2016. The owner declares general average, appoints an adjuster, and asks each cargo interest for security before releasing its goods. Once the voyage ends, the adjuster totals the allowable sacrifices and expenses and divides them across the saved values of ship, cargo and freight.

The 2016 revision changed three things that matter on a large casualty. It reinstated salvage payments in general average under Rule VI, which the 2004 Rules had restricted, while allowing adjusters to leave salvage out where re-apportioning it would change little. It abolished the 2% commission on general-average disbursements. And it replaced the fixed 7% interest rate with a variable rate linked to a market benchmark plus 4%. The Rules also come with CMI guidelines for adjusters, for the first time.

Who actually pays after a car-carrier casualty?

The cargo that arrives. Contributions are calculated on the value of property saved, so cargo that is destroyed contributes nothing, and a ship that sinks with all its cargo leaves little to adjust. Felicity Ace, which sank in 2022 with about 4,000 vehicles, is an example of the first kind of outcome; reporting at the time indicated the owner would still seek contributions toward salvage costs of around $150 million. General average bites hardest on the casualties where the ship and most of the cargo are saved: a fire contained, a tow to port, and a long list of consignees asked for security before they can collect their cars.

Is general average covered by cargo insurance?

Yes, under the standard terms. Clause 2 of the Institute Cargo Clauses covers general average and salvage charges, and the insurer normally provides the guarantee the adjuster requires, alongside the consignee's signed average bond. The exposure falls on cargo that is not insured on those terms: vehicles carried under a self-insurance programme, cargo insured below its value, which then contributes the uninsured share, and the carrier's own delay while security is collected from hundreds of consignees.

Cargo also has a defence. General average is not payable if the danger arose from the carrier's actionable fault, such as a failure to exercise due diligence to make the ship seaworthy. The UK Supreme Court's 2021 decision in the CMA CGM Libra case, where defective passage planning made the ship unseaworthy, upheld cargo interests' refusal to contribute.

• Check whether the cargo policy is on Institute Cargo Clauses terms and insures full value.
• If the fleet is self-insured, budget for general-average security as a cash or guarantee cost after any casualty.
• Keep the documents that show how the vehicles were declared and presented for loading.
• Ask what evidence the carrier keeps about how a fire started, since that decides any seaworthiness defence.

Sources

• 1. York-Antwerp Rules 2016, adopted by the Comité Maritime International — summaries by HFW, Skuld, NorthStandard and The Shipowners' Club: salvage reinstated under Rule VI; 2% commission abolished; fixed 7% interest replaced by a variable benchmark rate plus 4%; accompanied by the CMI Guidelines relating to General Average.
• 2. Institute Cargo Clauses (A), (B) and (C), 2009 — Clause 2, general average and salvage charges.
• 3. UK Supreme Court, Alize 1954 and another v Allianz Elementar Versicherungs AG ('CMA CGM Libra') [2021] UKSC 51 — unseaworthiness through defective passage planning; cargo not liable to contribute. As analysed in 'Does an EV Fire Make a Ship Unseaworthy?'.
• 4. Felicity Ace (2022) — reporting that the owner would seek general-average contributions toward salvage costs of around $150 million.