Lloyd's Maritime and Commercial Law Quarterly

Edited by Professor Francis D Rose

Document

THE INSURANCE OF AVERAGE DISBURSEMENTS

N. Geoffrey Hudson*

1. The nature and purpose of the insurance

The occasion for this insurance arises when a shipowner (or some other party who may be called upon to provide the finance) finds himself obliged to pay for general average disbursements or incurs a liability to salvors or other contractors in regard to expenses which will ultimately form the subject of a general average contribution from the other parties to the adventure.

In placing the insurance, the shipowner (or other financier of the maritime adventure) may well have two separate objects in view. His initial object will be:

(a) to protect himself against the risk that, between the time that he has incurred the liability to pay and the time that he can enforce his right to receive the contributions contingently due from the other parties to the common maritime adventure, the property liable to make such contributions may become a total loss or suffer such reduction in value that the fund available to pay those contributions will be insufficient to reimburse him for their proportion of the expenses and liabilities for which he has assumed responsibility.

Additionally the shipowner and his advisers may have in mind a further object, viz:

(b) to protect all the parties to the common maritime adventure (including himself) against the risk that, by reason of an event occurring after he has incurred such liability and before the contribution of all parties will be assessed, the basis of the contribution will be altered in such a way as to vary the incidence of liability to contribute to those expenses, thus placing an additional burden upon some of the contributing interests.

* M. A., Barrister, Member of the Association of Average Adjusters.

† From early 1985 until May 1987, a Committee of the London Marine Insurance Market, together with representatives of the Association of Average Adjusters, held a series of joint meetings in order to consider the revision of the standard clauses in use covering the insurance of average disbursements. As a result of the work done by the committee, the new Average Disbursements Clauses (A) and (B) were issued on 14 May 1987, and the author wishes first of all to acknowledge that, were it not for his participation as a member of this joint committee, he would not have been in a position to prepare this paper.

The author also wishes to acknowledge with grateful thanks the generous assistance given to him in the preparation of this paper by the chairman of the committee, Mr Philip Birch of the Prudential Assurance Co. Ltd., other members of the committee and his partners and colleagues within the Association of Average Adjusters, many of whom have read the text of the draft paper and offered suggestions for its improvement.

The author also acknowledges with thanks the permissions granted by the Institute of London Underwriters, the Association of Average Adjusters and Messrs Witherby & Co. Ltd. to reproduce the text of the Clauses herein.

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