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Why is General Average an important consideration for international shipping insurance?

Posted by By Bournes International Moves - April 7, 2021

When considering whether to take out insurance for international household goods shipping the main reason is financial protection for your items in case of loss or damage. However, your mover may also have pointed out that general average is another area to be aware of. But what is general average and why should you insure against the risk? 

Remember the grounding of the Ever Given container vessel in the Suez Canal in late March 2021? It was widely publicised in the media, particularly for the impact the issue had on global supply chains. More recently another container vessel, the Dali, crashed into a bridge in Baltimore Harbour. Whilst the biggest impact was of course the tragic loss of life, there will also be challenges to clear and repair the damage and salvage the ship. 

For those with shipments on board the Ever Given and Dali there would be additional concern regarding who pays for the damage and salvage operations, because of the little known concept of General Average.  

What is General Average?

General average is a principle of maritime law that says all stakeholders in a sea venture proportionately share the losses resulting from actions taken to preserve the safety of the ship, it's crew or the rest of it's cargo and the voyage in case of emergency. 

This could involve the costs of salvage or recovery and/or the costs of compensating customers whose goods were jettisoned  (thrown overboard) for the common safety of the whole voyage. 

Why would customers be concerned about who pays for the salvage operation?

Because the little known concept of General Average could mean that those with shipments on board would be responsible for a share of the costs of recovery. With often sizeable bills this can be extremely concerning for those who were uninsured for the risk.

This article explains a little more in relation to the Baltimore incident where president Joe Biden has said that whilst federal government will pay for reconstruction of the bridge the damages incurred could fall on those with cargo on board. 

What is the cost of General Average?

Typically the insurance adjustor will determine the costs each shipper is responsible for as a % of the value of their shipment. 

An article on the website gcaptain.com gives an example of a 2018 fire onboard a container ship where the adjustor fixed the costs at 54% of cargo value.

In this example, for an uninsured Household Goods shipment valued at £30,000 this would mean paying an additional cost of £16,200 to get the shipment released. 

There can also be significant delays for uninsured shipments as they may need to wait until the costs have been determined by the insurance adjustor before their shipment can be released. 

How often is General Average declared?

According to Wikipedia there are several cases of General Average being declared in recent years:

  • MV Hyandia Fortune - following an explosion and fire in 2006
  • MV MSC Sabrina - after running aground in 2008
  • Hanjin Osaka - following an explosion in the engine room in 2012
  • Maersk Honam - following a fire in 2018
  • Northern Jupiter - following an engine fire in 2020
  • Ever Given - following grounding in 2021

This is not an exhaustive list, but as you can see whilst declaring General Average isn't a frequent occurrence, it does happen. 

Does International Removals insurance cover General Average?

This will depend on your International Removals Company and their insurance policy, so you should check the terms and conditions carefully ensuring General Average coverage is specified. 

At Bournes International Moves the insurance we offer our customers is an all risks policy, covering General Average and Salvage charges in full. 

IMPORTANT: Most International Removals companies offer insurance as an optional add-on. If you have chosen NOT to take insurance from them, and have not arranged any other insurance that covers this risk then you will be personally responsible for covering any losses, including General Average and salvage. 

Ensure your shipments are comprehensively insured

Whilst the frequency of ships declaring general average is fairly rare, it does happen, and the cost if it does is significant, that's why we advise all customers to ensure their shipment is comprehensively insured. 

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