General Average

General average is one of the oldest doctrines in maritime law, codified in England by section 66 of the Marine Insurance Act 1906. It applies where a sacrifice or expense is deliberately incurred to save a ship and its cargo from a common peril, and it spreads that loss across everyone whose property was saved, rather than leaving it to fall on whichever cargo owner happened to be sacrificed. The Act defines the trigger precisely: 'There is a general average act where any extraordinary sacrifice or expenditure is voluntarily and reasonably made or incurred in time of peril for the purpose of preserving the property imperilled in the common adventure.'

Two things must both be true for the doctrine to apply: the sacrifice or expenditure must be extraordinary (going beyond the ordinary risks and costs of the voyage), and it must be made voluntarily and reasonably in the face of actual peril — a shipmaster jettisoning cargo to lighten a ship that has run aground is the classic example. Once a general average act has occurred, section 66(3) provides that 'the party on whom it falls is entitled, subject to the conditions imposed by maritime law, to a rateable contribution from the other parties interested, and such contribution is called a general average contribution.'

General average interacts closely with marine insurance. The 1906 Act allows an assured who has incurred a general average expenditure to recover from their insurer 'in respect of the proportion of the loss which falls upon him', and an assured whose cargo was sacrificed to recover the whole loss from the insurer without first having to pursue the other cargo interests for their contributions. The insurer then effectively stands in the assured's shoes for the purpose of collecting the rateable contributions from the other parties to the adventure.