FIRE IN ENGINE ROOM OF MAERSK MIAMI - WHAT IS GENERAL AVERAGE

Dear (s) - first some news of a loss near Mumbai and then some Marine insurance !!!!

There was news in Indian newspapers of vessel MV Maersk Miami, bound for JNPT carrying many containers catching fire 43 nautical miles off the Goa coast on 26/3/10. This is a 1994 built 56248 GT, Liberian flagged containership with call sign of A8PK9 on voyage from Korea, Japan, Hong Kong and Indonesia, with future calls in India, Pakistan, Sri Lanka, Malaysia and Singapore, laden with more than 2000 loaded containers.

It is reported that 23 crew were rescued and there was no loss of lives. A major fire had broken out in the engine room and distress signal was received by the Indian Coast Guard Ship (ICGS) Shubadra Kumari Chauhan off the Tarapur coast, which alerted the Indian Navy. The navy sent its FAC-82 high-speed patrol boats with medical assistance. The navy diverted two other ships in the area for further assistance. The Coast Guard sailed its interceptor boat, ICGS Samrat, simultaneously towards the vessel. The rescue ships arrived on the spot by midnight and the fire was reportedly doused by 2am, Saturday. MV Aranda Colossus and MV Chime, passing by in the nearby area, arrived after they were alerted. The crew of MV Maersk Miami was transferred by ICGS Samrat to sister ships MV Maersk Dauphin and MV Nedllyod Africa. MV Maersk Miami, along with ICGS Samrat, was waiting for ocean tugs, when reports last came in. The owners had despatched two tugs for salvage assistance.

It is anticipated General Average will be declared and salvage costs will be incorporated into the assessment of GA. The circumstances of the fire will require to be investigated with a view to determining nature and cause and also to identify responsibility for the fire. Well, this news item would intrigue you to know what is General Average and here is another attempt in guiding you on the basic tenets of Marine Insurance. Most of the Insurance Policies covers physical loss of or damage to the subject matter insured.

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Sure you would have observed that Institute Cargo Clauses the clauses that are used for insuring cargo through ocean transit provides for something more. It would read that this insurance covers General Average and salvage charges adjusted or determined according to the contract of affreightment…….. incurred to avoid or in connection with the avoidance of loss from any cause except those excluded in clauses 4,5,6 & 7 or elsewhere.

In insurance parlance, if the sum insured is expressed to be ‘subject to average, it refers to proportionate reduction reflecting Under insurance if the sum insured is less than the value of the subject matter insured. In marine insurance parlance, average means loss and particular loss would mean partial loss. There is also the concept of General Average.

GA is an ancient principle of equity in which all parties in sea adventure proportionately share losses arising out of voluntary and successful sacrifice or extraordinary expense incurred for common benefit. It is a legal principle of maritime law aimed at sharing the losses. History has it that under Rhodian Law, if in time of peril cargo was thrown overboard to lighten a ship, that which had been given for the good of all should be replaced by a contribution from all that was saved. Due to many and varied different interpretations between maritime trading countries it was decided, in the 19th century, to codify General Average. The result being a set of Rules - the York/Antwerp Rules of 1890. These rules have also been amended from time to time and would find a reference in the Bill of lading.

In principle , there is a general average act when and only when any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purposes of preserving the peril the property involved in a common maritime adventurE.   When a marine casualty arises mid sea, steps are required to be taken to protect or save the ship and cargo from serious damage or total loss. The steps taken may result in expenditure being incurred and/or deliberate loss or damage to some of the property at risk, but result in the saving of other property.

Some of the common circumstances leading to GA could be :

v      Engine and/or propeller damage and fuel used in refloating a stranded ship.

v      Damage to ship &/or cargo by water, steam etc., in the effort to extinguish a fire on board the ship.

v      Damage or loss of cargo caused by the forced discharge of cargo to refloat the ship, to get at the seat of a fire, to effect repairs to the ship to enable the voyage to be undertaken in safety.

v      Jettison of cargo, for the safety of the ship and remaining cargo in time of peril.

v      Expenses incurred in entering a port of refuge for the common safety

v      Salvage services rendered to ship and cargo are normally treated as general average. Salvors have a lien on the ship and cargo and might insist on security at the time of rendering their services.

Marine Insurance Act 1963 which has codified all principles of Marine Insurance deals about GA in Sec 66. The Act states :

General average loss. (1) A general average loss is a loss caused by or directly consequential on a general average act. It includes a general average expenditure as well as a general average sacrifice.

(2) 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.

(3) Where there is a general average loss, 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.

(4) Subject to any express provision in the policy, where the assured has incurred a general average of expenditure, he may recover from the insurer in respect of the proportion of the loss which falls upon him ; and in the case of a general average sacrifice, he may recover from the insurer in respect of the whole loss without having enforced his right of contribution from the other parties liable to contribute.

(5) Subject to any express provision in the policy, where the assured has paid, or is liable to pay, a general average contribution in respect of the interest insured, he may recover therefor from the insurer.

(6) In the absence of express stipulation, the insurer is not liable for any general average loss or contribution where the loss was not incurred for the purpose of avoiding, or in connection with the avoidance of a peril insured against.

(7) Where ship, freight, and cargo, or any two of those interests, are owned by the same assured, the liability of the insurer in respect of general average losses or contributions is to be determined as if those interests were owned by different persons.

The above is MI Act, then there is York Antwerp Rules which have been developed to provide a uniform approach to the handling of General Average losses. Many contracts of carriage provide for the application of these Rules. Where they do not apply General Average claims and compensation are determined by local law. The latest set is known as York Antwerp Rules 2004. This contains Rule Paramount, Numbered Rules and Lettered rules.

The Rule Paramount states “In no case shall there be any allowance for sacrifice or expenditure unless reasonably made or incurred”.

The lettered rules range from A to G. A defines the GA act, G states that GA shall be adjusted as regards both loss and contribution upon the basis of values at the time and place when and where the adventure ends.

The numbered rules defines the various items that could be considered under GA such as : Jettison of cargo, extinguishing fire on ship board, cutting away wreck, voluntary stranding, salvage remuneration, damage to machinery and boilers, expenses at a port of refuge etc.,

If you found this to be useful, do send in your feedback either by way of comment down below or e-mail the author at : samvijib17@gmail.com

Regards – S Sampathkumar.