Particular Average, General Average and Salvage

In one line

A particular average loss falls on the person it happens to; a general average loss is shared by everybody the sacrifice saved.

In the wording a student can write in an exam: by section 64 a particular average loss is a partial loss caused by a peril insured against which is not a general average loss; by section 66 a general average loss is one caused by or directly consequential on a general average act, being an extraordinary sacrifice or expenditure voluntarily and reasonably made or incurred in time of peril for the purpose of preserving the property imperilled in the common adventure, and the party on whom it falls is entitled to a rateable contribution from the others interested; and by section 65 salvage charges, meaning charges recoverable by a salvor under maritime law independently of contract, may be recovered as a loss by the perils insured against.

The oldest rule in the subject

General average is older than insurance itself. If a ship in peril must throw cargo overboard to survive, the owner whose goods went over has saved everybody. It would be absurd for him to bear the whole loss while the others arrive intact, and the rule that they must contribute appears in the Rhodian sea law, was taken into Roman law as the lex Rhodia de jactu, and is in sections 66, 72 and 73 of this Act.

It is not a rule of insurance at all. It is a rule of maritime law between the parties to the adventure, and insurance merely picks it up: the assured recovers from his insurer what general average costs him.

And in practice it is administered by contract. Bills of lading and charterparties incorporate the York Antwerp Rules, an international code first agreed in 1864 and revised since, which state the rules of general average in detail. An average adjuster prepares a statement apportioning the loss over ship, cargo and freight.

Particular average: section 64

Section 64(1) provides that a particular average loss is a partial loss of the subject matter insured, caused by a peril insured against, and which is not a general average loss.

It is defined negatively, and that is the point. Every partial loss is particular average unless it qualifies as general average. Damage to cargo by sea water entering through a strained plate is particular average: it happened by accident and it lies where it falls.

Section 64(2) provides that expenses incurred by or on behalf of the assured for the safety or preservation of the subject matter insured, other than general average and salvage charges, are called particular charges, and that particular charges are not included in particular average.