Marine Insurance Losses

Losses in marine insurance business are result of the various perils. Marine insurance policy does not necessarily cover all the risks. All insurer is liable to indemnify an insured in respect of only losses which result from perils insured against.

When the loss occurred is beyond the insured peril, the insured himself shall have to bear. The onus of proof under a policy of marine insurance is upon the insured to establish that the loss was proximately, caused by an insured peril. When goods are insured against “All Risks”, the onus of proof of loss is transferred to the insurer.

Marine Perils

The perils insured against are mentioned in the policy and the underwriter shall be liable for damages cause by the insured perils.

“Marine Perils means the perils consequent on”, or incidental to the navigation of the sea, that is to say, perils of the sea, fire, war perils (enemies), pirates, rovers, thieves, captures, seizures, restraints and detainment of princes and peoples, jettisons, barratry and other perils, either of the like kind or which may be designated by the policy.”

1. Perils of Sea

Under perils of sea, ordinary action of the winds and waves, ordinary wear and tear to the vessel, inherent risk of the cargo are not included. The underwriter may be liable for losses caused by Perils of the sea, he is not necessarily liable for perils on sea.

Perils on the sea refers to fortuitous accidents or casualties of the sea. If the loss arising out of any of the perils of the sea insured is attributable to the fraud or wilful misconduct of the assured, the underwriter is acquitted from the liability under the policy.

2. Fire

In olden times fire was the biggest maritime perils, but recently it has been under control to a greater extent.

Damage resulting from fire and smoke is included under fire-peril. The water used for extinguishing fire may cause damage to the insured goods. So, this peril is also insurable. The damage due to spontaneous combustion may be maritime peril and be insured against.

Damage done due to the lightning, explosion and fire originating from negligence of the crew is recoverable from underwriters. The losses which are not included in the standard policy can be covered by having special clauses and paying extra-premium.

3. Man-of-War

This is the vessel which is authorized by nations for the purpose of defence or attack in the event of hostilities. Any damage to the goods or ships arising out of collision against a man-of-war is insurable.

4. Enemies

The ships belonging to the foe (enemy) may cause loss to the insured and is re-underwritten by the marine policy. This policy extends to all the persons of the enemy country and to their hostile acts provided such acts form part of the enemy actions.

5. Pirates, Rovers, Thieves

The perils on account of pirates, rovers and thieves were common in olden times, but it has been reduced considerably these days.

These acts are generally committed for the pursuit of individual gain by the persons beyond the jurisdiction of a state. The term ‘thieves’ does not mean clandestine theft or a theft committed by anyone of the crew or officers or passengers.

6. Jettison

Jettison means voluntary throwing away of the cargo or part of a vessel’s equipment for the lightening or relieving the ship for common safety.

The aim of the intentional throwing away of the goods or property is to relieve the vessel from some imminent peril. Accidental falling of things does not constitute jettison. The own inherent-vice of cargo is also not included in the jettison.

7. Barratry

Barratry includes every wrongful act willfully committed by the master or crew the prejudice of the owner.

The act of barratry must be committed without the knowledge of the owner. The theft, the setting fire to ship, fraudulent selling of vessel and cargo without the connivance of the ship-owner are the various examples of the barratry.

The insurer, if barratry insured, is liable for losses arising out of barratry.

8. Restraints and Detainments

The prevention to free use of a port by the government of the country is called restraints. It may cause interruption and possible loss of voyages involving such ports and sacrifice of cargo.

The term ‘detainments’ covers losses resulting from the detention of a vessel and its cargo by blockage or possibly quarantine regulation or other interference by the police power of a nation while a vessel is in port.

It does not cover losses which are the result merely of delay or interruption of the voyage, or loss of market or some other remote result.

9. The Free of Capture and Seizure Clause (F.C. & S. Clause)

The policy generally covers war perils. But, to include perils of sudden declaration of war, the war clause or free of capture and seizure clause is added to relieve war perils.

By deletion of this clause, the policy is automatically restored to its original condition and adequate premiums are charges for the purpose.

10. Explosion

The risk of explosion has greatly increased. The explosion on board of a vessel damaging hull or cargo or both could be constructed as a peril on the sea.

An explosion on shore might damage a ship or its cargo. Marine cargo policies were amended to include the risk of explosions not clearly caused by war perils. The explosion, in case of hull policies, ‘on shipboard or elsewhere’ is covered in the amended “Inchmaree or Negligence clause”.

11. Strikes, Riots and Civil Commotion Clause

The marine insurance on cargo is extended to cover from warehouse to warehouse or otherwise insures the gods on shore prior to shipment and after discharge, the danger of underwriters being held liable for losses, resulting from the unlawful acts of strikes from riots or civil commotion is materially enhanced.

The insurers are unwilling to assume liability for losses due to unlawful acts.

12. All Other Perils

Loss occurred by salt water of the sea, action of worms on timber, cattle dying due to want of fodder as a result of lengthy voyage constitute sea perils. There may be other damages due to oil, sweat, heat, which are insured under other perils.

Marine Losses

If the loss takes place on account of any of the perils insured against with the insurer, the insurer will be liable for it and shall have to make good the losses to the assured.

If the peril is insured, the insurer will indemnify the assured, otherwise not. The doctrine of causa proxima is to be applied while calculating the amount of loss.

It means for payment of losses, the real or proximate cause is to be taken into account. If the proximate cause is insured, the insurer will pay, otherwise not.

Total Loss

According to S. 57(1) of the Marine Insurance Act, there is an actual loss where the subject matter insured is destroyed or so damaged as to cease to be a thing of the kind insured or where the assured is irretrievably deprived thereof.

Losses are deemed to be total or complete when the subject matter is fully destroyed or lost or ceases to be a thing of its kind.

It should be distinguished from partial loss where only part of the property insured is lost or destroyed. In case of total loss, the insured stands to lose to the extent of the value of the property provided the policy amount was to that limit.

1. Actual Total Loss

Actual total loss is a material and physical loss of the subject-matter insured. Where the subject matter insured is destroyed or so damaged as to cease to be a thing of the kind insured, or where the insured is irretrievably deprived thereof, there is an actual total loss.

When a vessel is foundered or when merchandise is so damaged as to be valueless or when ship is missing it will be an actual total loss.

The actual total loss occurs in the following cases:

(a) The subject-matter is destroyed, e.g. a ship is entirely destroyed by fire.

(b) The subject-matter is so damaged as to cease to be a thing of the kind insured. Here, the subject-matter is not totally destroyed but damaged to such an extent as the result of the mishap, it is no longer of the same specie as originally insured.

The examples of such losses are – foodstuff badly damaged by sea water became unfit for human consumption, hides became valueless as hides due to admission of water. These damaged foodstuffs or hides may be used as manure.

Since the characters of the subject-matters are changed and have lost their shapes, they are all actual total loss.

(c) The insured is irretrievably deprived of the ownership of goods even if they are in physical existence as in the case of capture by enemy, stealth by thief or fraudulent disposal by the captain or crew.

(d) The subject-matter is lost. For example, where a ship is missing for a very longtime and no news of her is received after the lapse of a reasonable time. An actual loss is presumed unless there is some other proof to show against it.

In case of actual loss, notice of abandonment of property need not be given. In such total losses, the insurer is entitled to all rights and remedies in respect of damaged properties. In no case, amount over the insured value or insurable value is recoverable in a total loss from the insurers.

If the property is under-insured, the insured can recover only up to the amount of insurance. If it is over-insured he is not over-benefitted but only the actual loss will be indemnified.

Where the subject-matter had ceased to be the kind of insured, the assured will be given the full amount of total loss provided there was insurance up to that amount, and the insurer will subrogate all rights and remedies in respect of property. Any amount realized by the sale of the material will go to the insurer.

2. Constructive Total Loss

Section 60 of the Act defines constructive Total Loss. Where the subject-matter is not actually lost in the above manner, but is reasonably abandoned when its actual total loss is unavoidable or when it cannot be preserved from total loss without involving expenditure which would exceed the value of the subject-matter.

For example, the cost of repair and replacement which was estimated to be Rs.50,000 whereas the ship was estimated to be Rs.40,000. The ship may be abandoned and will be taken as constructive total loss.

But if the value of ship was more than Rs.50,000 it would not be constructive total loss. Here it is assumed that retention of the subject-matter would involve financial loss to the insured.

The constructive total loss will be where:

(a) the subject-matter insured is reasonably abandoned on account of its actual total loss appearing to be unavoidable;

(b) the subject-matter could not be preserved from actual total loss without an expenditure which would exceed its repaired and recovered value.

The insured is not compelled to abandon his interest, where the goods are abandoned, the insurer will have to pay the full insured value. Where there is constructive total loss, the assured may either treat the loss as a partial loss or abandon the subject-matter insured to the insurer and treat the loss as it it was an actual total loss.

Notice of Abandonment

The notice of abandonment is essentially given to the insurer to claim the loss as constructive total loss. If he fails to do so, the loss can only be treated as a partial loss. The notice can be given orally or in writing.

The notice should be unconditional and absolute. The insurer may either elect to accept or decline the proposal. But, when the insurer elects to object the object the notice, the insured should at once commence legal action against the insurer to claim ‘the loss’ under constructive total loss. In brief, the notice of abandonment involves the following:

(a) Subject to the contrary provision, where the insurer elects to abandon the subject-matter insured to the insurer, he must give notice of abandonment. If the insured fails to furnish the notice, the loss can be treated as a partial loss.

(b) The notice can be given in writing or orally. It may be given in any terms which indicate the intention of the assured to abandon his insured interest in the subject-matter insured unconditionally to the insurer.

(c) Notice of abandonment must be given with reasonable diligence after the receipt of reliable information of loss, but where the information is of a doubtful character, the insured is liable to furnish the required information.

(d) If notice of abandonment is properly given, the rights of the assured are not prejudiced by the fact that the insurer refuses to accept the abandonment.

(e) The acceptance of an abandonment may be either express or implied from the conduct of the insurer. The mere silence of the insurer is not an acceptance.

(f) Where notice of abandonment is accepted the abandonment is irrevocable.

(g) Notice of abandonment is unnecessary where there is no possibility of benefit to the insurer if notice was given to him.

(h) Notice of abandonment may be waived by the insurer.

Effect of Abandonment

(a) In case of valid abandonment the insurer is entitled to take over the interest of the assured in, whatever may remain of the subject-matter insured.

(b) At the time of abandonment of ship, the insurer is entitled of any freight in course of being earned.

In case of constructive total loss, the insurer has a right, after the settlement of the claim in full, to take over the property or whatever may remain of it.

Where the insurers elect to take over the remainders of the wreck, the cost of removing the wreck is borne by the insurers. But, in case insurers elect not to take over the destroyed party, it becomes the liability of the ship-owners to remove the wreck and incur necessary expenditure for the same.

The constructive total loss in the case of vessels is distinguished from the constructive total loss in cargo or freight. In case of cargo, the constructive total loss will be there where the assured is deprived of the goods by insured perils.

In case of damage to the goods there is a constructive total loss where the cost of reconditioning the goods and forwarding the goods to the destination would exceed their value on arrival.

Hull policy covers total and partial losses and partial losses are paid in full irrespective of the insured amount, the insured amount merely serves as the maximum limit.

Difference between Actual and Constructive Total Loss

Actual total loss is related with the physical impossibility and the constructive total loss is related with the commercial impossibility. For example, if the hides are so damaged that it is impossible to prevent the hides from the destruction and it may become a mass of putrefied matter, the case is of an actual total loss.

But if it was possible to restore the hides to their original condition, though the cost of so doing would exceed their value at destination, the damaged hides can be claimed as constructive total loss because the completion of the adventure has become commercially impossible.

Salvage Loss

Where actual total loss occurred, and the subject-matter is so damaged as to cease to be a thing of the kind insured or when they have been sold before reaching the destination, there is a constructive total loss.

The usual form of settlement is that the net sale proceeds will be paid to the assured. The net sale proceeds is calculated by deducting expenses of the sale from the amount realize by the sale. The insured will recover from the insurer the total loss less the net amount of sale. This amount received from the insurer is called a ‘Salvage Loss’.

Partial Loss

Section 56 of the Act provides that any loss other than a total loss is a partial loss. Partial loss is there where only part of the property insured is lost or destroyed or damaged.

Partial losses, in contradiction from total losses, include

(a) Particular Average Losses, i.e., damage, or total loss or a part,

(b) General Average Losses (General Average), i.e., the sacrifice expenditure, etc. done for common safety of subject-matter insured,

(c) Particular or special charges, i.e., expenses incurred in special circumstance, and

(d) salvage charges.

Particular Average Loss

Section 64 of the Act defines Particular Average loss as ‘a partial loss’ of the subject-matter insured caused by a peril insured and is not a general average loss.

The general average loss or expense is voluntarily done for the common safety of all the parties insured. But, the particular average loss is fortuitous or accidental.

It cannot be partially shifted to others but will be borne by the persons directly affected. The particular average loss must fulfil the following conditions:

(a) Particular Average Loss is a partial loss or damage to any particular interest caused to that interest only by a peril insured against.

(b) The loss should be accidental and not intentional.

(c) The should should be on the particular subject-matter only.

(d) It should be the loss of a part of the subject-matter or damage thereto or both. The distinguishing feature in this matter is that where the properties insured are all of the same description, kind and quality and they are valued as a whole in the policy, the total loss of a part of this whole is a particular loss, but where the properties insured are not all of the same description, kind and quality and they are separately valued in the policy, the loss of an apportionable part of the interest is a total loss.

In case of total loss of a part of recoverable either as a total loss or as a particular average loss, the basis of settlement will be on the total loss of the whole lot and the insurer will be liable to pay in proportion according to the insured or insurable value of the whole interest.

Particular Average on Cargo

The particular average loss may be either the damage and depreciation of a particular interest or a total loss of its part. If the property is insured under one value for the whole and is all the same kind, quality or description, a total loss of part will be recovered as a particular average loss.

In case where goods are delivered in a damaged condition or where the value is depreciated, the resulting particular average loss will be adjusted upon the basis of comparison between the gross sound value and damaged value. The process of valuation is as follows:

(a) The gross sound value of the goods damaged is found out. This is the value for which the goods would have been sold if the goods had reached the port of destination in sound condition.

(b) After calculating the above value, the gross damaged value of the goods damaged or depreciated is found out on the basis of market price at that time.

(c) Deduct the gross damaged value from the gross sound value. The difference is the measure of the actual damage or depreciation.

(d) The ratio of the damage or depreciation is calculated by dividing the amount of damage or depreciation by the gross sound value.

(e) Apply the above ratio to the value (insured or insurable value as the case may be) of the damaged or depreciated goods which will give the amount of particular average loss.

(f) Of the amount thus arrived at, the insurer is liable for that proportion which his sum insured bears to the value (insured or insurable).

Particular Average on Ship

In case of partial loss of ship the following factors are considered:

(a) Where the ship has been repaired, the assured is entitled to the reasonable cost of the repairs less the customary deductions. The amount of repair shall not be more than the sum insured.

(b) Where the ship has been only partially repaired; the assured is entitled to the reasonable cost of such repairs, reasonable depreciation.

(c) If the ship has not been repaired and has not been sold in her damaged state during the risk, the assured is entitled to be indemnified for the reasonable, depreciation arising from the unrepaired damage.

The measure of indemnity for particular average is the reasonable cost of repairing the damage less the customary deductions ‘new for old’.

If the damaged parts of the ship are old then the insurers is obliged to indemnity the insured only to the extent of the value of the old parts.

But when new parts are added, the difference between the value of the new parts and the value of the old parts are made. Insurers are liable for the cost of repairing particular average damage to the ship irrespective of the insured or actual value of the ship where temporary repairs are necessary the insurers are liable for such repairs in addition to the permanent repairs.

Where a ship cannot be repaired at the port of refuge, cost of removal to another port is regarded as part of the cost of repairs.

Extra expenses involved in ‘over-time’ working are not allowed.

Particular Average in Case of Freight

Where there is a partial loss of freight, the measure of indemnity is such proportion of the sum fixed by the policy in the case of a valued policy, or of the insurable value in the case of an unvalued policy as the proportion of freight lost by the assured bears to the whole freight at the risk of assured under the policy.

General Average

Section 66 of the Act defines General Average as a loss caused by or directly consequential on a general average act which includes a general average expenditure as well as a general average sacrifices.

The general average loss will be there where the loss is caused by an extraordinary sacrifice or expenditure voluntarily and reasonably made or incurred in time of peril for the purpose of preserving the property imperilled in common adventure. The following elements are involved in general average.

(a) The loss must be extraordinary in nature. The sacrifice or expenditure must not be related to the performance of routine work. A state of affairs may compel the master to do something beyond his ordinary duty for the preservation of the subject-matter.

(b) The whole adventure must be imperilled. The peril should be something more than the ordinary perils of the sea. It should be imminent and real.

(c) The general average act must be voluntary and intentional accidental loss or damage is excluded.

(d) The loss, expenses or sacrifice must be incurred or made reasonably and prudently. The master of the ship is proper person to decide the reasonableness of a particular circumstance.

(e) The sacrifice, loss or expenditure should be made for the preservation of the whole adventure. It should be made for the common safety.

(f) If the sacrifice proved abortive, it will be allowed as the total loss. Therefore, to call it general average, it must be successful at least in part.

(g) In absence of contrary provision, 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.

(h) The loss must be direct result of a general average act. Indirect losses such as demurrage and market losses are not allowed as general average.

(i) General average must not be due to some default on the part of the person whose interest has been sacrificed.

Difference between General Average Loss and Particular Average Loss

(a) General average is incurred for the benefit of all interests but the particular average is in connection with any of the interests.

(b) General average is always voluntary and intentional but the particular average is an accidental or fortuitous.

(c) General average is shared by all those who is benefitted by the general average act. Particular average is paid by the insurer.

(d) General average may include expenditure and sacrifice along with loss, whereas the particular average results from a loss or damage.

Types of General Average Loss

The general average losses are divided into two classes.

1. General Average Sacrifices

The general average sacrifices are made for common safety. For example ‘jettison’ which means throwing away of the cargo in order to lighten the ship. Similarly, the use of cargo as fuel, cutting away of a spare and sails.

2. General Average Expenditure

The general average act involves expenditure. In this case extra expenditures are involved for common safety. Here, additional charges are incurred at the port ship is repaired, expenses may be involved for lightening and re-loading of the cargo.

General Average Contribution

The general average loss is rateable contributed by the parties interested. In contribution of general average loss the contributory interest, amount to be made good and contributory values are considered.

1. Contributing Interests

The interests saved by the general average act are liable to contribute rateably to make good the sacrifices or expenses. There are certain articles which are not required to contribute towards general average loss.

For example, postal articles, parcel, crews, effects and the personal effects of passengers not shipped under a bill of lading.

There are three main contributing interests – ship, freight and cargo. When a general average loss occurred among different interests, it is of vital importance that the interest which has been sacrificed must also rateably contribute to the loss, otherwise it would be in a better position than the interests saved by general average act.

2. Amounts to be Made Good

The amount to be made good in general average differs from adventure to adventure.

(a) Ship : The amount to be made good in general average in respect of a ship is measured by reasonable cost of repairs less the actual deduction (if any) new for old.

The costs of repairs are taken into account as they have been actually effected either at a port of refuge or at destination.

(b) Cargo : The amount of general average in case of goods is their net value. The net value is calculated taking into account the value of goods sacrificed at their safe arrival and from this the expenses (i.e., freight unpaid, duty and landing charges) which would have been incurred had the goods arrived safely, are deducted.

Thus, the net value of goods is obtained. The remaining cargo arrives damaged from causes which would have actually affected the sacrificed goods.

The amount to be made good for general average purposes is their net value based on what the goods sacrificed would have realised, had they reached the destination damaged to some extent as the other cargo.

For goods arriving damaged owing to general average sacrifice, the allowance is the difference between their net value in sound condition and net value in damaged state.

(c) Freight : Where the freight is to be paid at destination in respect of a cargo which is used for general average act, the shipowner will lose it and it would be made good in general average.

The shipowner is entitled, for the gross freight which he would have earned, had the goods not been sacrificed less the charges which he would have incurred to earn such freight during the remainder of the voyage, but which he has not incurred as a result of the sacrifice.

(d) Expenses : All the extraordinary expenses properly incurred by the shipowner in time of peril for the common safety of all the interests are also made under the general average contribution.

3. Contributory Values

The third process is to determine what are the bases to contribute to general average.

The interest contributes on their net value at the place where the voyage ends, i.e., at destination or at intermediate port if the voyage be abandoned there.

The values are contributory values. It may be of three types.

(i) Ship : The shipowner will contribute on the ship’s value as saved by the sacrifice. The value is the amount for which the shipowner as a reasonable man would be willing to sell her on arrival at her destination. Any amount that may have been contributed in respect of general average damages is added to this value to arrive at contributory value.

(ii) Cargo : The cargo owner will contribute on the market value of goods saved at the place where the voyage ends. To arrive at the value the expenses incidental to the safe arrival of the cargo is deducted from the selling price of the cargo.

(iii) Freight : If the freight has been paid in advance, it would have been included in the value of separate interest. The goods arrived safely at destination will have to contribute on the basis of the net value of freight saved if the freight was not paid in advance.

The contribution of freight will arrive at by ascertaining the actual sum of freight received at port of destination less than expenses of earning it from the date of general average act.

Application of General Average to Insurance

In absence of contrary to the contract, the general average losses and contributions are recoverable from the respective marine insurers insuring ship, freight and cargo if the general average has been incurred for the purpose of avoiding a peril insured against.

The extent of insurers, liability for general average contribution is the full amount of the contribution provided the contributory value does not exceed the insured value.

The York-Antwerp Rules 1950

The York-Antwerp rule was formulated in 1877. The rule was again revised and extended at a meeting of the International Law Association held at Stockholm in Sept.1924.

The rule was again amended in the 1950 and 1974. Now, the rule is called the York-Antwerp Rules 1974. It has been formulated in to forms

(a) Lettered Rules
(b) Numbered Rules

Lettered Rules

There shall be 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 purpose of preserving from peril.

The general average sacrifices and expenses shall be borne by the different contributing interests. Only such losses, damages, or expenses which are the direct consequences of the general average act shall be allowed as general average. The lettered rules are described from A to G.

Numbered Rules

The numbered rules I to XIX specify the various losses and expenses that are considered to be general average sacrifices. The last three rules XX, XXI and XXII govern the banking arrangements in connection with the adjustment.

It is provided that cash deposits paid to the adjusters as security for the final general assessment shall be treated as a fiduciary funds and placed in a special bank account.

Jettison of Cargo, Fire

No Jettison of cargo shall be made good as general average unless such cargo is carried in accordance with the Rule I and II.

Rule III

Extinguishing fire on shipboard done to a ship and cargo or either of them by water or otherwise will be included in general average.

Rule IV and V

Cutting Away wreck, stranding : Where a vessel has been partially wrecked by a sea peril and portion of the spares remain, the cutting away of these remnants is not allowed for in general average.

The place of stranding should be voluntarily selected by the master. Loss or damage incurred in refloating such stranded ship shall be allowed as general average.

Rule VI and VII

Damage or loss caused to soils and spares and machinery shall be allowed in general average if it was due to general average act.

Rule VIII to XII

Expenses involved from lightening a ship to the reloading or discharge of cargo are involved in general average ships’ materials and stores build for fuel are also taken as general average. Wages and maintenance of crew and other expenses at a port of refuge are taken into general average if these are involved for general average act.

Rule XIII

In adjusting claims for general average repairs to be allowed in general average shall be subject to deductions in respect of “new for old” according to the rules. Temporary repairs made for the common safety shall be admitted as general average (Rule XIV).

Rule XVII

This rule mentioned that the contribution to a general average shall be made upon the actual net value of the property at the termination of the adventure to which values shall be added the amount made good as general average for property sacrificed.

Rule XV, XVI, XVII, XVIII

These deal with the loss of freight, amount to be made good for large and damage to ship.

Rule XIX

This rule deals with the undeclared value of goods without the knowledge of the shipowner or his agent or to goods wilfully misdescribed at the time of shipment shall not be allowed to general average but such goods shall remain liable to contribute.

Rules XX, XXI and XXII deal with the banking provision of the general average.

Expenses

The expenses are :

  1. Particular charges
  2. Salvage charges
1. Particular Charges

Where the policy contains a “Sue and Labor” clause, the engagement thereby entered into is deemed to be supplementary to the contract of insurance and the assured may recover from the insurer any expenses properly incurred pursuant to the clause.

The clause requires the insurers to pay any expenses properly incurred by the assured or his agents in preventing or minimizing loss or damage to the subject-matter by an insured peril. The essential features of the clause are as below”:

(a) The expenses must be incurred for the benefit of the subject matter insured. The expenses incurred for the common benefit will be a part of general average.

(b) The expenses must be reasonable and be incurred by “the assured, his factors, his servants or assigns” and this provision effectively excludes salvage charges.

(c) They are recoverable only when incurred to avert or minimize a loss from a peril covered by the policy.

Sue and Labour

Sue and labour charges are a type of particular charges. They are incurred short of destination i.e. reconditioning costs and follow upon loss or damage, whereas particular charges may be incurred when loss in threatened imminent but is avoided by expenses for that purpose. In real and actual sense sue and labor is a sort of particular charges.

Extra Charges

Extra charges are the expenses of proving a claim e.g. survey fees. These are payable only if the loss is payable under the policy. Where extra charges are payable by insured, insurance cover is given. For example sale, charges and auction fees incurred in disposing of damaged cargo.

2. Salvage Charges

Section 65 of the Act defines salvage charges as those recoverable under maritime law by a salvor independents of contract.

It is the remuneration or reward payable according to maritime law to salvors who voluntarily and independently of contract render services to rescue or save property at sea i.e. hull, cargo and freight.

No reward for services or payments for loss or expenses can be claimed by salvors where the services were unsuccessful and the property was totally lost.

Average and Adjusters

The adjustment of general average losses is entrusted to an average adjuster. The specialized knowledge and the reputation for strict impartiality ensure that their findings are acceptable to all. The adjuster’s fees are allowed in general average. This is also allowed in particular average loss.