If cargo is deliberately sacrificed to save a ship, the owner of that cargo does not bear the loss alone. A rule older than modern insurance spreads it across everyone with property aboard.
The principle behind the rule
The reasoning is that a sacrifice made for the common safety benefits all interests in the voyage, so all should contribute to the resulting loss.
Without this, a master facing a decision might hesitate over which cargo to jettison, or an owner might resist a step that saved the vessel at their expense.
The rule long predates cargo insurance and has been carried into modern practice largely intact, codified in internationally used sets of rules.
What counts as a general average act
The act must be extraordinary, intentional and reasonable, made for the common safety in a time of peril. Ordinary voyage costs do not qualify.
Typical examples include jettisoning cargo to refloat a grounded vessel, damage caused by firefighting, and the cost of towage or salvage services engaged in an emergency.
Damage from the peril itself is not general average. Cargo destroyed by the fire is a particular loss, while cargo ruined by water used to fight it may be shared.
How the contribution is calculated
An average adjuster values the ship, the cargo and the freight at risk, then apportions the sacrifice and the qualifying expenditure across those values.
Each cargo owner's share is proportional to the value of their goods, which means a shipper of a single container can owe a share of a very large loss.
Adjustment is slow. Establishing values across hundreds of consignments and settling disputed items can take years after the incident.
Why cargo is held until security is posted
The shipowner has a lien on cargo for its contribution, so goods are typically not released until each owner provides security.
Security usually takes the form of a general average bond from the cargo owner and a guarantee from the cargo insurer, backed by a declared value.
An uninsured shipper must post cash or an acceptable guarantee instead, which is one of the situations where the absence of cover becomes immediately expensive.
Why the rule remains contested
Critics argue that modern insurance already spreads maritime losses and that the adjustment process adds cost and delay without changing who ultimately pays.
Defenders point out that it governs conduct during an emergency and gives the master a clear basis for acting, and that it applies to parties who are not all insured.
Revisions to the governing rules have narrowed some categories over time, and the debate about scope has continued through successive versions.