Canadian Accredited Insurance Broker (CAIB) One Practice Exam

What does general average provide payment for?

1. Losses incurred voluntarily to save the entire venture

2. Insurance claims for personal property damage

3. Legal fees for maritime disputes

4. Routine maintenance costs for vessels

The correct answer is: Losses incurred voluntarily to save the entire venture

General average is a principle in maritime law that applies to a situation where a voluntary sacrifice is made to save the entire voyage or venture from a greater peril. When a portion of the cargo is deliberately sacrificed, or expenses are incurred (such as jettisoning cargo or using additional resources) to prevent a total loss of the ship and its entire cargo, the costs associated with these actions are shared among all stakeholders in the venture. This means that if a ship must jettison some cargo to save the ship and the remaining cargo from sinking or going aground, the owners of the cargo that was sacrificed can claim a proportionate share of the costs and losses from the other parties involved in the voyage. This concept ensures that all parties involved bear a fair share of the loss incurred for the common benefit. By focusing on voluntary losses aimed at preserving the overall success of the venture, general average distinguishes itself from other claims and expenses, thereby reinforcing its role in maritime liability. Other options like insurance claims for property damage, legal fees for maritime disputes, or routine maintenance costs do not relate to this principle and do not involve the sharing of voluntarily incurred costs to save a maritime venture.