What do actual total loss, constructive total loss, general average and individual average mean?

What do actual total loss, constructive total loss, general average and individual average mean?

Once the goods are at risk during the sea transportation, it may cause the loss of the goods. The losses caused by the "maritime risks" (including "natural disasters" and "accidents") that the goods may suffer during sea transportation are called "average damage" or "maritime losses" in the insurance business, and the goods may suffer In the insurance business, the losses caused by "external risks" (including "general external risks" and "special external risks") are called "other losses".

The losses that may be suffered by the goods during the sea transportation are large or small. In the insurance business, the losses caused to the insured goods can be divided into total loss (total loss) and partial loss (partial loss) according to the degree of loss.

Total loss (actual total loss & constructive total loss)

Total loss referred to as "total loss" refers to the total loss of the insured goods during sea transportation.

In terms of the nature of loss, total loss can be divided into actual total loss and constructive total loss.

1. Actual total loss

Actual total loss, also known as absolute total loss, means that the insured goods are completely lost during transportation, or have completely lost their original use, which is equivalent to total loss.

In the insurance business, there are mainly the following situations that constitute an actual total loss:

1) The ship carrying cargo sinks into the seabed after encountering a shipwreck, and all the insured goods are lost;

2) The cargo-carrying ship is robbed by pirates, or the cargo is seized by hostile countries, etc. Although the cargo still exists, the property rights of the insured have been completely lost and cannot be recovered;

3) Certain insured goods, such as cement hardened after being soaked in sea water, and tobacco leaves moldy after being damp, have lost their original commercial value or use;

4) In international trade, according to the distance of the voyage and the area of the voyage, if the cargo ship is missing and there has been no news for a considerable period of time, it is also regarded as the total loss of the insured goods.

2. Constructive total loss

Deemed total loss refers to the fact that the actual total loss of the insured goods is inevitable, or in order to avoid the actual total loss, the sum of the expenses to be paid for salvage, restoration, repair of the damaged goods, and delivery of the goods to the original destination has exceeded the The value of the goods at this destination.

The circumstances that constitute a constructive total loss of the insured goods are as follows:

1) After the insured goods are damaged, the repair cost exceeds the value of the goods after repair;

2) After the insured goods are damaged, the cost of sorting out and continuing to transport them to the original port of destination has exceeded the value of the goods after they arrive at the original port of destination;

3) The actual total loss of the insured goods is unavoidable, and the rescue expenses required to avoid total loss will exceed the value of the rescued goods;

4) The insured has lost the ownership of the insured goods, and the cost of recovering the ownership has exceeded the value of the insured goods.

Partial loss (general average & individual average)

Partial losses refer to losses that are not actual total losses and constructive total losses. That is to say, any loss that does not belong to actual total loss and constructive total loss is called partial loss.

Partial losses can be further divided into general average and particular average.

1. General average

General average means that during the voyage of the ship, when the ship, cargo and other interested parties are in danger and are in common danger, the ship party consciously and reasonably makes sacrifices in order to maintain the common safety of the ship and cargo or to continue the voyage. Or pay special fees, these special sacrifices and expenses are called general average.

For example, if a ship runs aground for some reason, in order to save the ship and its cargo, the captain has to order some of the cargo on board to be thrown into the sea to reduce the weight and float the ship to save the day. Goods thus thrown overboard are general average.

Another example is that the propeller of the ship fails or is knocked down during the voyage, so that the ship is out of control. In order to escape from danger, the captain had to call for help from the nearby port and asked to send a tugboat to tow it. This additional expense incurred due to the hiring of a tugboat for towing is also included in general average.

General average must generally have the following characteristics:

1) The danger leading to general average must first of all be real or unavoidable, rather than subjective speculation, and the danger must endanger the common safety of ships and cargo;

2) All measures must be intentional and reasonable in order to relieve the common danger of the ship and cargo;

3) The loss must be the direct or reasonable consequence of the general average measure, it is of a special nature, and the cost is additionally paid, so the sacrifice and cost of the general average should be borne by all interested parties.

2. Individual average

Individual average is relative to general average. Although it is also a partial loss, it is purely caused by accidental accidents and does not include human factors; the losses suffered only involve the self-interest of the ship or cargo owner. , and has nothing to do with the interests of all parties such as the ship, the cargo or even the freight. The loss directly caused by it shall be solely borne by the cargo insurance beneficiary.

Once the goods are at risk during the sea transportation, it may cause the loss of the goods. The losses caused by the "maritime risks" (including "natural disasters" and "accidents") that the goods may suffer during sea transportation are called "average damage" or "maritime losses" in the insurance business, and the goods may suffer In the insurance business, the losses caused by "external risks" (including "general external risks" and "special external risks") are called "other losses".

The losses that may be suffered by the goods during the sea transportation are large or small. In the insurance business, the losses caused to the insured goods can be divided into total loss (total loss) and partial loss (partial loss) according to the degree of loss.

Total loss (actual total loss & constructive total loss)

Total loss referred to as "total loss" refers to the total loss of the insured goods during sea transportation.

In terms of the nature of loss, total loss can be divided into actual total loss and constructive total loss.

1. Actual total loss

Actual total loss, also known as absolute total loss, means that the insured goods are completely lost during transportation, or have completely lost their original use, which is equivalent to total loss.

In the insurance business, there are mainly the following situations that constitute an actual total loss:

1) The ship carrying cargo sinks into the seabed after encountering a shipwreck, and all the insured goods are lost;

2) The cargo-carrying ship is robbed by pirates, or the cargo is seized by hostile countries, etc. Although the cargo still exists, the property rights of the insured have been completely lost and cannot be recovered;

3) Certain insured goods, such as cement hardened after being soaked in sea water, and tobacco leaves moldy after being damp, have lost their original commercial value or use;

4) In international trade, according to the distance of the voyage and the area of the voyage, if the cargo ship is missing and there has been no news for a considerable period of time, it is also regarded as the total loss of the insured goods.

2. Constructive total loss

Deemed total loss refers to the fact that the actual total loss of the insured goods is inevitable, or in order to avoid the actual total loss, the sum of the expenses to be paid for salvage, restoration, repair of the damaged goods, and delivery of the goods to the original destination has exceeded the The value of the goods at this destination.

The circumstances that constitute a constructive total loss of the insured goods are as follows:

1) After the insured goods are damaged, the repair cost exceeds the value of the goods after repair;

2) After the insured goods are damaged, the cost of sorting out and continuing to transport them to the original port of destination has exceeded the value of the goods after they arrive at the original port of destination;

3) The actual total loss of the insured goods is unavoidable, and the rescue expenses required to avoid total loss will exceed the value of the rescued goods;

4) The insured has lost the ownership of the insured goods, and the cost of recovering the ownership has exceeded the value of the insured goods.

Partial loss (general average & individual average)

Partial losses refer to losses that are not actual total losses and constructive total losses. That is to say, any loss that does not belong to actual total loss and constructive total loss is called partial loss.

Partial losses can be further divided into general average and particular average.

1. General average

General average means that during the voyage of the ship, when the ship, cargo and other interested parties are in danger and are in common danger, the ship party consciously and reasonably makes sacrifices in order to maintain the common safety of the ship and cargo or to continue the voyage. Or pay special fees, these special sacrifices and expenses are called general average.

For example, if a ship runs aground for some reason, in order to save the ship and its cargo, the captain has to order some of the cargo on board to be thrown into the sea to reduce the weight and float the ship to save the day. Goods thus thrown overboard are general average.

Another example is that the propeller of the ship fails or is knocked down during the voyage, so that the ship is out of control. In order to escape from danger, the captain had to call for help from the nearby port and asked to send a tugboat to tow it. This additional expense incurred due to the hiring of a tugboat for towing is also included in general average.

General average must generally have the following characteristics:

1) The danger leading to general average must first of all be real or unavoidable, rather than subjective speculation, and the danger must endanger the common safety of ships and cargo;

2) All measures must be intentional and reasonable in order to relieve the common danger of the ship and cargo;

3) The loss must be the direct or reasonable consequence of the general average measure, it is of a special nature, and the cost is additionally paid, so the sacrifice and cost of the general average should be borne by all interested parties.

2. Individual average

Individual average is relative to general average. Although it is also a partial loss, it is purely caused by accidental accidents and does not include human factors; the losses suffered only involve the self-interest of the ship or cargo owner. , and has nothing to do with the interests of all parties such as the ship, the cargo or even the freight. The loss directly caused by it shall be solely borne by the cargo insurance beneficiary.