is that of "average," which involves a discussion of the terms "general average" and "particular average. General average may be defined as covering all those losses which result from the sacrifice of any interest voluntarily and deliberately made by the master of a vessel in time of distress for the common safety of the ship, cargo, and freight, and which must be repaid proportionately by all the parties benefited. Justice demands, for example, that if a shipowner cuts away the masts and sails, or voluntarily strands his vessel, or incurs expenses by putting into a port of refuge for the sake of preserving the cargo, he should not be obliged to bear the loss alone. Likewise, if an owner's cargo is sacrificed in quenching a fire aboard the vessel, or is thrown overboard to save the vessel, it would be grossly unjust to make that owner stand all the loss. Hence the introduction of the principle that all such sacrifices should be compensated for by making them a charge upon the value of all the other interests involved.

In the case of the vessel a loss in "general average" exists only when any part has been destroyed in time of danger, for the common safety, or when for the same reason it has been put to a use for which it was not intended. The cutting away and throwing overboard of masts, spars, and sails, or the injuring of a steamer's propeller while attempting to extricate it from a dangerous position are a few of the many illustrations that might be mentioned. While very complex cases for settlement may arise, the amount ordinarily collected in "general average" in all such cases is the reasonable cost of repairs, after deducting the customary allowance (usually one third) which is granted as a commutation for the difference between old and new repairs. In the case of the cargo the amount allowed usually equals the net value which the goods would have brought when discharged, after deducting the charges for freight, landing, etc., which would have been incurred had the goods not been lost. If,

however, the goods are merely damaged, the amount allowed is the difference between the net proceeds when sold and the. value which they would have had if undamaged. When freight is lost the sum allowed ordinarily consists of the gross freight which the vessel would have earned had the goods been saved, after deducting: (1) The charges which would have been incurred in order to carry the freight had the goods been saved; and (2) any freight which may be earned by carrying goods which are substituted at a port of call in place of those which were sacrificed. 1

The various amounts thus ascertained are then levied upon the value of all the interests which were saved from destruction by the general average act. Usually the vessel, in case it is one of the contributory interests, contributes on the value it possesses upon arrival at the port; the freight contributes on the net amount of freight saved; while the cargo contributes upon its net value at the port of landing. The guiding principle in making all these contributions is that the person whose goods were sacrificed should be placed in exactly the same position as he would be if the goods of some other person had been sacrificed for the common safety. To bring this about it is necessary that the sacrificed interest should also contribute its proper share. To return the sacrificed interest in full without claiming the proper contribution would mean placing the owner of the same in a favored position, since he would recover his property in full, while the other owners would be asked to make a contribution. Thus assuming the ship, cargo, and freight to be worth respectively $50,000, $25,000, and $1,000, and that $5,000 of this has been jettisoned, the following apportionment of general average would be made:

1 For a very comprehensive discussion of General Average in Marine Insurance, see William Gow's "Marine Insurance: A Handbook," Fourth Edition, 1909.

Total value contributing.......$76,000, contributing to a

It should always be remembered that the liability for general average contributions and the right to claim it are matters which are entirely independent of marine insurance. If no insurance exists on any of the property involved, the respective owners must bear the contributions themselves. If, however, the property sacrificed is insured, then the underwriter becomes liable for the insured value, and by paying the same, comes into possession of the right to receive the sums allowed in general average after deducting the contribution which applies to the interest he now represents. Moreover, if the contributing interests are insured, the underwriter is also liable for general average damage. But in determining the extent of his liability for such contributions, the insured value of the property must be taken into account. If the insured value is equal to the value of the contributing interest, the underwriter pays all the general average contributions; but if it is less, he only pays the contribution in the proportion which the insured value bears to the contributory value.

3. Particular Average. This term comprises all partial losses occurring to the ship, cargo, or any other interest in consequence of marine perils which do not come under general average. While "general average" refers to losses arising from voluntary sacrifice, particular average refers to

losses resulting from accident. No sacrifice is made in particular average for the common benefit; no claim can therefore be made for compensation by general contribution. The loss must fall exclusively upon those who own or have an interest in the property lost or damaged, unless the same is insured, in which case restitution is made by the insurer.

Generally speaking, the underwriter's liability for particular average on hulls is measured by the reasonable actual cost of repairs after deducting "one third new for old" (the allowance frequently made as a commutation of new for old), and after crediting the underwriter with the value of the old material. In the case of a damaged cargo, the liability is usually represented by the difference between the gross sound value of the goods and the gross proceeds obtained from their sale, the percentage of loss thus ascertained being then applied to the amount of insurance carried. In the case of freight, the underwriter's liability is based on the insured value of the freight, and varies in proportion to the extent that the cargo is lost.

4. Salvage. By salvage in marine insurance is meant the reward granted by law for services in saving life and property at sea. To be a true case of salvage, the service must have been of material assistance in saving the property, and must have come from third parties. The sum payable for the service is usually apportioned over the values of the various interests saved, just as in the case of general average, and is recovered from the underwriter in exactly the same manner, provided the contributing interests are insured.

CHAPTER XXVII

POLICY PROVISIONS PROTECTING THE INSURER AGAINST FRAUD, UNNECESSARY LOSS, AND

UNDESIRABLE RISKS

MUCH the larger part of every marine policy consists of provisions which have for their object the protection of the insurer against fraud, unnecessary losses, and undesirable risks. The whole number of such provisions in the policies of the leading companies cannot be given here, and only those provisions which are now generally included in the policies of the principal companies will be presented. In doing this it is convenient to group these provisions under the following heads:

1. Other Insurance upon the Same Subject Matter.-That part of the marine policy relating to "other insurance" has reference to the liability of the insurer where the same property has been insured with two or more companies. In England this problem is solved by granting the insured the right to collect indemnity from whichever policy he pleases, the underwriter of this policy in turn possessing the right to collect a ratable contribution from the other underwriters who insured the same risk. Thus, where, without intention to commit fraud, the same property is insured equally with two companies, the insured may collect the whole loss from one company, which, in turn, will collect from the other one half the sum thus paid. Where the sum insured is not the same for both underwriters, the case is considered one of double insurance of the amount represented by the smaller of the two policies.