SHIPS BURNING & GENERAL AVERAGE · 2019-07-01 · –Deck fire on January 3, 2019 –Crew was evacuated on January 5, No injuries. 4 tugs. –Hapag-Lloyd declared GA on Jan. 25 –Richards

2019 © Avalon Risk Management | www.avalonrisk.com

Premier Provider of Innovative Insurance and Surety Solutions

SHIPS BURNING & GENERAL AVERAGE

AgTC 31st Annual Meeting

Keith Sanchez, Divisional Vice President

June 13, 2019


General Average


General Average 2019

Already this year, there have been several notable fires cases most resulting in

General Average.

Yantian Express

Year Built 2002, 100,003 dwt

Date of loss: 1/3/19

GA Declared: 1/25/19

202 containers are a total loss

APL Vancouver



GA Declared: 2/7/19

947 containers affected

E.R. Kobe



GA Declared: 3/12/19


General Average

• International Maritime Law dating back to AD530

• Ocean marine loss

– Voluntary sacrifice to save cargo/vessel/life

– Extraordinary expenses are incurred

• Jettison of cargo

• Extinguishing a fire

• Towing

• All cargo is seized. Amount of GA loss is determined

• All parties contribute to the loss base on their cargo’s

value whether their shipment was damaged or not.

• Adjustment of GA based on York Antwerp Rules


Sample General Average calculation

• $40 million Sacrificed Cargo + Expenditures

• The loss represents 20% of the contributing value

• Cargo owners must contribute 20% of respective cargo values

• A shipper with a $100,000 shipment must pay $20,000

• HOWEVER …… if insured, the insurance company puts up security and cargo is released.

• GA claims take years to resolve.

Vessel and freight value $100 million

Saved cargo value $100 million

Contributing value (total) $200 million


General Average Loss – Yantian Express Timeline

• MV Yantian Express

– Deck fire on January 3, 2019

– Crew was evacuated on January 5, No injuries. 4

tugs.

– Hapag-Lloyd declared GA on Jan. 25

– Richards Hogg Lindley appointed as Average

Adjuster

– Vessel towed to Freeport Bahamas on Feb. 4

where average adjusters determined financial loss


General Average Loss-Yantian Express

Photos courtesy of Master Mariner


General Average Loss

Terminals are designed for throughput of container cargo. Not able to

handle large quantities of damaged container cargo and have

space constraints to handle the damaged containers.



Not only expensive and complicated to handle in port; think of salvage at sea



Damage can be extensive, almost dangerous to discharge from vessel



Labor intensive to empty and repack



Unloading standard containers is easy, however, unloading damaged

containers is time consuming and requires ingenuity.


General Average Loss-Yantian Express

• 202 containers are a total loss and around 460 containers have

yet to be surveyed. Salvage operations are ongoing.

• Salvage and General Average Securities Determined

• Average Security: 28%

• Salvage Security: 32.5%

• 60.5% CASH DEPOSIT FOR UNINSURED CARGO

A cargo owner with a cargo worth $100,000 is has to pay $60,500

to get their goods!!!



• Cargo will only be released upon provision of the

required security.

• Richards Hogg Lindley requires the following forms:

– Salvage Security (32.5% Cash Deposit or Insurer’s

Guarantee)

– Average Bond form (promise to pay future

adjustments)

– General Average Security (28% Cash Deposit or

Insurer’s Guarantee)

– A copy of the cargo invoice


General Average

• MV Yantian Express

– General Average Guarantee

– General Average Bond


Yantian Express Updates

• May 21st 2019 – Yantian Express arrived at

Halifx. The discharge of the remaining 3,200

containers will take weeks

• No room at port so surveys need to be done at

destination.

• Securities still have not been posted for about

1/3 of the containers that survived the fire.


General Average Exposures

• Will the uninsured shipper pay $60,500 to get their

$100,000 container? Maybe Not…

– Option to abandon the cargo with written notice to

carrier and copy to average adjuster.

– Who will pay for the demurrage, storage, disposal?

– Who is the Shipper on the Master Bill of Lading?

– Do you have Extra Expense Coverage?

– Concern with LCL Freight


Major Fire Cases Since 2012


M/V MSC Flaminia

• Vessel fire occurred in July 2012

while on route to Antwerp, Belgium.

• There were hazardous chemicals on

the vessel which caused the

explosion.

• Heat sensitive chemicals sat out in

New Orleans heat for 10 days in July

• Three crew members died and the

aggregate claims totaled over $280

million.

• Court determined that NVOCC was

partially liable (45%) for explosion as

it did not exercise appropriate care

when it exercised its duties.


Questions?

2019 © Avalon Risk Management | www.avalonrisk.comApril 21,

2016

For more information, contact:

Keith E. Sanchez, Divisional Vice President

Office: 310-337-7050 | Cell: 310-337-7050

Email: [email protected]

mailto:[email protected]

Documents

SHIPS BURNING & GENERAL AVERAGE · 2019-07-01 · –Deck fire on January 3, 2019 –Crew was evacuated on January 5, No injuries. 4 tugs. –Hapag-Lloyd declared GA on Jan. 25 –Richards