California Property & Casualty Broker-AgentMiscellaneousMedium
A cargo ship carrying a variety of goods encounters a severe storm, forcing the captain to jettison a portion of the cargo to save the vessel and the remaining freight. Which principle of ocean marine insurance would cover the proportionally shared loss by all parties with an interest in the voyage?
- ASue and Labor Clause
- BConstructive Total Loss
- CParticular Average
- DGeneral Average
Show answer & explanationAnswer & explanation
Correct answer: D. General Average
General Average is an ancient principle in maritime law where all parties whose cargo was saved must contribute proportionally to compensate for the loss of cargo that was intentionally sacrificed to save the entire venture.
Why the other options are wrong
- A. Sue and Labor clauses cover expenses incurred by the insured to prevent or minimize a loss.
- B. Constructive Total Loss occurs when the cost to repair a vessel exceeds its insured value.
- C. Particular Average refers to a partial loss borne solely by the owner of the damaged property.
General Average
A principle of maritime law where all parties with an interest in a voyage (ship, cargo, freight) proportionally share in losses incurred to save the entire venture from imminent peril.
- Intentional sacrifice of property (e.g., jettison)
- To save the entire ship and remaining cargo
- Losses are shared proportionally by all beneficiaries
Memory trick: GENERALly, everyone shares the AVERAGE loss to save the whole.