CHAPTER XI.

OF GENERAL AVERAGE.

We have already considered the law of General Average, at much length, in that part of our work which contains the law of shipping.1 Indeed, the law of general average was an important part of the law of shipping very many centuries before the practice of insurance began. At present, the great majority of all the questions which occur in the law of average, come up under policies of insurance. The reason of this is easily seen. By the law of general average, maritime loss is equalized. This is effected by making a loss which was originally that of one party, become the loss of other parties also, by requiring them to contribute to the partial compensation of the first loser. The law of average, therefore, never touches the question what is a loss; but only, when a loss occurs, determines whose loss it shall be; that is, which party among all who are interested in ship, or cargo, or freight shall bear the loss, and in what proportion it shall be divided among these interests.

In these days, the great bulk of maritime property is insured. When any loss happens, therefore, there is somebody concerned beside the loser; and this is the insurer, who has agreed to hold the loser harmless. If there be a loss, therefore, the insurer may be the party who suffers it. Or, if the loss is one which carries with it a right of indemnification, if the insurer pays that loss he thereby acquires the loser's right of indemnification, because by the payment he becomes the loser himself. And therefore it is that if any question arises under the law of general average, it will generally be found that they who are inter

1 See ante, Vol. I. p. 284–334.

ested in it, are persons who represent the original losers by having insured them.

In this chapter, it is not necessary to consider anew the general principles of the law of average, for they are unaffected by entering into relation with those of insurance. But to present the qualifications of the law of average, or rather the new and peculiar questions in relation to it, which are brought up by the application of these principles to parties who were not the original losers. And of the principles themselves, we shall say only so much as our present purpose requires.

For this purpose we must state briefly the general object of the law of average. It is to divide an actual maritime loss, among all, whose loss it really and substantially is and ought to be. For example, many and diverse interests being involved in a common peril, from which escape is possible only by the voluntary sacrifice of one of them, if this sacrifice is made, and thus the peril is avoided by all the rest, it is plain that it must be considered the sacrifice or loss of all involved in the danger, and an escaping from it by the sacrifice which the good of all required. And this simple rule is the foundation of the law of general average, which we may say is as old as maritime commerce, not merely because it rests on principles of which the need must come early, and the justice and expediency are always obvious, but on the evidence of those earliest records which have crumbled under the influence of time, and come down to us only in fragments.

We must further remark, that the reason and the efficacy of this law of average, require that three things should be considered as absolute essentials, without the concurrence of all of which, no maritime loss can be a general average loss. The first of these is, that the loss must be a voluntary and intended sacrifice. For if a loss occur which is not the result of a free choice, it may benefit others, but nevertheless give no claim against them for contribution. This claim rests always on the supposition, that the party advancing it has, for the benefit of others, undergone a loss which he might have refused to suffer.

The second is, that the sacrifice was necessary, or at least that there was an actual appearance that otherwise all would perish, and a rational possibility at least, that by the sacrifice of a part, the rest might be saved. For without this, the loss

was only a wanton, or a foolish destruction of property; and upon an act like that no one could ground a claim for indemnity; although the party suffering the loss might have a claim against the master, to whose fault it was owing, or against those who employed him.

The third is, that the sacrifice must be successful; that is, it must save other property. For, however well intended or meri. torious it may be, the claim for contribution is not founded upon the moral quality of this act, but upon its beneficial effect. At its own expense, one interest has saved other interests. Therefore it shall be at the expense of the other interests also. Hence, the rule that nothing but what is saved contributes. By this is meant what is ultimately saved; and therefore from this contributory value must be deducted all subsequent losses, or averages, or other expenses which are necessary to the safety of the property or interests contributing.

These three essentials have already been stated, in a somewhat different form, in a preceding chapter; and there illustrated in detail.1 Here we pass to the way in which insurance becomes connected with average.

The first remark we make is, that the law of general average, and each case or question of average, is generally the same whether it does or does not come into relation with insurance. The only question proper to the law of insurance in this behalf being whether the insurer or the insured shall bear the loss. But in many of these cases, there is a previous question, which is, whether there be any average loss at all, or what the loss is; for if there is a loss the insurers certainly must pay it. And this is very frequently the first and only question that is tried, the insurers merely taking the place of the insured.

The general rule is, that a loss by general average, is a maritime loss, for which insurers are responsible. The two limitations of this, which, if not the only ones, are at least the most important, are, first, that insurers are answerable only when they have insured the very thing, or interest, which is called upon to contribute to an average loss. If they insured the thing which was itself sacrificed, they are as liable to pay for it as

1 See ante, Vol. I. p. 288, n. 1.

if it were not an average loss, that is, as if it were a common loss by a peril of the sea. But by paying it they possess themselves of all the claims for contribution to which the sacrifice of the thing entitled the owner of it.

The other limitation is, that insurers are responsible only when they have insured against the very peril or cause of loss which made the sacrifice necessary. The reason is this. The whole purpose and effect of average is to equalize the loss; to spread it over all the interests; but the nature of the loss remains unaffected. Thus, if we suppose that insurers have insured the cargo of A against all perils, etc., excepting fire. Then a fire breaks out, and some part of the vessel, its sails, or rigging, is destroyed at once to extinguish the fire or prevent its spreading; and it saves the rest of the property. To this the cargo must contribute, and A pays his contribution in money. He cannot call on the insurers, for the theory of general average is, that A's loss is as much and entirely a loss by fire, as if his own goods, instead of the ship-owner's, had been destroyed. And he is not insured against a loss by fire. Or, to take another illustration, A's cargo is insured by a common policy, but an additional clause is inserted, "excepting all war risks." The ship and cargo are captured by an enemy, and taken into port, and after much expense the master succeeds in obtaining their liberation. The owner of the cargo will pay his share; but the loss he thus sustains is a loss by a war risk, and that is expressly excepted.

One question under the law of average, which can arise only when insurers are a party to the case, is whether the insured, if he has a claim against others for contribution, is bound to make that claim before he calls on the insurer. If so, his demand against the insurer is less by the exact sum he receives from the contributors. If he does not first enforce this claim, and the insurers pay him all that he has lost, the insurers become thereby possessed, for their own benefit, of the claim for contribution. It might, therefore, seem to be the same thing in effect and amount, whether the insured collects or transfers his claim. But circumstances may make it a very different thing.

If, for example, the contributors are insolvent or cannot be reached, and the lien of the party entitled to contribution, has not been enforced against the contributory property; here the

claim is valueless. If the insured can demand his whole loss of the insurers, it is they who lose the value of the contributory claim. If he must enforce this claim first himself, and demand of the insurers only the balance, he loses this value. On this point, it seems now to be well settled, that the insured may claim of the insurers his whole loss, transferring to them his claim for contribution.1

It would seem, however, that there must be this qualification to the rule. If the claim for contribution, which would belong to the insurers by their payment of the loss, be of no value, or of lessened value, and this loss or diminution of value has been caused in any way by the negligence or fault of the insured, he must bear this loss, and must allow the insurers for the amount in the same way as if he had collected it.

Practically, therefore, the result is this. The insured, although not bound to collect his contributory claim before a ling on his insurers, usually does this if he can; and he may claim his whole loss of the insurers, leaving to them this contributory claim, whatever may be its value, provided he has not, by refusal of a tender or some other similar act of his own, lessened that value or prevented its recovery.

Another question arises under the American rule which makes a loss of more than fifty per cent. of value, a constructive total loss. If, for example, the immediate loss is sixty per cent., and there is a claim of contribution for twenty per cent., it may be said that the actual loss is but forty per cent., which is not enough to make it constructively total. In a previous chapter, on total loss, it was remarked, that if the contribution was not received by the insured, it might be disregarded; but if actually paid, only the balance of loss under such payment should be considered. This would seem to give to the insured, not only the option of making it a total loss or not, but to give him the

1 Maggrath v. Church, 1 Caines, 196; Watson v. Marine Ins. Co., 7 Johns. 57, 62; Amory v. Jones, 6 Mass. 318; Faulkner v. Augusta Ins. Co., 2 McMullan, 158; Hanse v. New Orleans Marine & F. Ins. Co., 10 La. 1. See also, dicta to this effect by Story, J., in Potter v. Providence Washington Ins. Co., 4 Mason, 298, and by Shaw, C. J., in Greely v. Tremont Ins. Co., 9 Cush. 415, 419. See also, cases in the next

note.