Marine cargo: general average, particular average and deductible
A Chennai importer insured 20 containers of industrial valves from Shanghai to Chennai under an ICC(A) marine cargo policy for ₹10 crore, declared at 110% of CIF. During the voyage the vessel met heavy weather. The master ordered three containers jettisoned to lighten the ship; one of the insured’s containers was among them. Another insured container suffered seawater damage when a hatch cover was damaged in the same weather. The carrier declared general average. At Chennai the surveyor finds: the jettisoned container had a CIF value of ₹40 lakh; the seawater-damaged container has a repair cost of ₹25 lakh and a salvage value of ₹3 lakh. The insured claims the full ₹40 lakh for the jettisoned container plus ₹25 lakh for the damaged container, and refuses to contribute to general average. The policy has a deductible of ₹5 lakh.
1. Classify each loss and explain the basis for payment under ICC(A).
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The jettisoned container is a general average sacrifice: the master intentionally and reasonably sacrificed cargo to save the ship and the remaining cargo. The loss is recoverable in general average, and the cargo policy responds to the insured’s general average sacrifice and to the insured’s general average contribution. The seawater-damaged container is particular average: accidental damage caused by seawater entering through a damaged hatch cover. ICC(A) covers both perils unless an exclusion applies. The insured is wrong to refuse to contribute to general average: a party whose property is saved by a general average act must contribute, and the cargo insurer normally pays that contribution. The surveyor should obtain the average adjustment, the master’s protest, the deck and stowage records, and the casualty report before finalising the figures.
2. How should the deductible and salvage be treated? Show the calculation of the particular average claim.
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For the seawater-damaged container, start with the repair cost of ₹25 lakh and deduct the salvage value of ₹3 lakh, because the damaged cargo retains a realisable value. The particular average loss is therefore ₹22 lakh. Apply the policy deductible of ₹5 lakh to this particular average claim, giving ₹17 lakh, unless the policy wording provides otherwise. For the jettisoned container, treat the loss as a general average sacrifice. The deductible clause must be read carefully: under the Institute Cargo Clauses the deductible generally does not apply to a claim for total loss, but it may apply to a general average contribution. Do not simply add ₹40 lakh and ₹22 lakh and deduct ₹5 lakh once; show the general average sacrifice, the general average contribution and the particular average separately. The final payable figure will depend on the general average adjustment and on whether the deductible applies to the contribution.
3. What is the effect of the general average declaration on the insured’s claim and on the insurer’s subrogation rights?
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The general average declaration means the insured cannot claim the jettisoned cargo as an ordinary particular average loss and ignore the contribution. The insurer pays the insured’s general average sacrifice and, where covered, the insured’s general average contribution. The insured must provide the average bond or guarantee and the adjustment. On payment, the insurer is subrogated to the insured’s rights against the carrier and other cargo interests, including the insured’s right to receive payment from the general average fund. For the seawater damage, subrogation applies against the carrier if the carrier is liable, but recovery may be limited by the Hague-Visby package limitation or by the bill of lading terms. The surveyor should recommend that the insurer preserve rights against the carrier and not waive subrogation by settling without a reservation.