Raymond T C Wong
One of the business opportunities which has arisen as a result of the Belt and Road Initiative involves marine insurance and claims handling. This has prompted an examination of one of the most valuable support services available to the maritime and insurance community, Average Adjusting, with a view to raising the awareness of Hong Kong being an international average adjusting centre.
I – INTRODUCTION
Nothing is 100% certain; nothing is 100% safe. Marine casualties occur on a daily basis, thus the need for marine insurance which was highlighted by an act of the English Parliament in 1601:
“By means of insurance, if a ship is lost, there will not follow the ruination of any one man; instead, the loss will fall lightly upon many men, and more particularly on wealthy men who stay safely at home, rather than on those who adventure abroad and take risks, whereby all merchants, especially the younger ones, are able to be more adventurous in their trading and take greater risks.”
Marine casualties are often complex affairs and the improper handling of a situation can aggravate cash flow problems and lead to rights and liabilities vis-a-vis insurers and third parties being prejudiced. Understandably, very few assured are capable or interested in handling complicated insurance related claims arising out of marine casualties.
Professional average adjusters, however, with their detailed knowledge of maritime practice, insurance, and law – supported by rigorous training and professional qualifications, are able to assist with virtually any aspect of a maritime casualty; they appear to be a combination of lawyers and accountants and are not there to make a profit/gain for any parties involved in the maritime adventure or the policies of marine insurance, only to make sure that claims are settled fairly. It is for their expertise that average adjusters are appointed and/or consulted, almost invariably by shipowners, to advise and assist as necessary after a maritime casualty giving rise to general average, although under English Law at least, shipowners are not obliged to employ a professional average adjuster and they may draw up their own average adjustment.
For insurers including re-insurers, the concern is that claims are not aggravated and rights are not prejudiced by improper action after a casualty. Later they are concerned that they pay no more and no less than the proper claim. In the long established insurance market of London and those which follow the practice of London (including Hong Kong and Taiwan), it appears that the conventional insurers would be prepared to advise the Assured in the manner along the following lines:
“Marine insurance claims are likely to be complicated; we appreciate that the Assured is likely to be at a disadvantage. We want you (the Assured) to feel confident that we will pay valid claims. As a pledge of that confidence, we (the Insurer) will allow you to use an Average Adjuster of your choice and we will pay his bill.”
Hong Kong has been adjusting averages since 1945, and with its highly qualified adjusters having had work experience in major shipping and insurance markets, and a great amount of effort going continuously to the training of adjusting staff as well as claims practitioners (for the benefit of the marine insurance industry), has evidently acquired a considerable reputation internationally.
II – ADJUSTING AVERAGES
The Average Adjuster adjusts averages which are losses or claims arising from maritime casualties. So, the Average Adjusters are assessing and stating marine claims – insurance, general average and liability.
Average adjusting has been around for a very long time, dating back to when the story of general average started some 2,500 or 3,000 years ago. In those far off times, merchants usually travelled with their cargo on board the ship. In spite of all safety precautions, disaster could suddenly threaten these little ships. Following the grounding of a vessel, the only way to refloat her may have been to deliberately throw overboard some cargo. There must have been many fierce arguments between the merchants as to whose cargo was to be jettisoned, until presumably the shipmaster with common sense made an important decision which was subsequently embodied in the law of the Island of Rhodes about 2,500 years ago:
“If in order to lighten a Ship, merchandise is thrown overboard, that which has been given for all shall be replaced by the contribution of all.”
Assume that Cargo B was chosen to be jettisoned and the vessel refloated to resume her voyage, the contributions to the sacrifice were settled by the parties to the adventure upon safe arrival at destination, probably by the shipmaster adjusting and apportioning the sacrifice over the values of the property saved and/or made good as follows:
It will be seen that everyone whose property was at risk had sustained the same degree of loss i.e. 25%.
From the above brief recital, it is apparent that general average exists independently of insurance (though it can be looked upon as being a form of mutual insurance) and, indeed, had been in existence long before any policies of insurance as we know them today were in use. Nevertheless, it is now common for the property owners to be insured so that they may recover anything they pay in general average from their insurers. Consequently, the settlement of general average has, in practice, become a settlement between insurers. Hence, whilst general average has nothing to do with insurance, insurance has much to do with general average.
The York-Antwerp Rules
The essential fairness of the general average system has been followed by virtually all countries with maritime trade although the laws in each country vary. Efforts made to attain international uniformity started in the year 1860, resulting, ultimately, in the York-Antwerp Rules, which are today widely accepted throughout the world. Almost all contracts of carriage, being either charter parties or bills of lading, provide for general average to be adjusted according to the York-Antwerp Rules (to the exclusion of any law and practice inconsistent therewith). These rules have been reviewed and revised from time to time, the latest version being York/Antwerp Rules 2016:
- York Rules 1864
- York/Antwerp Rules (“YAR”) 1877
- YAR 1890
- YAR 1924 (CMI started as custodian)
- YAR 1950
- YAR 1974
- YAR 1974 as amended 1990
- YAR 1994
- YAR 2004
- YAR 2016
It is worth noting that YAR 2004 was unfortunately approved without a consensus between shipowning and other interests, hence receiving negligible support. Currently, the set of rules commonly incorporated in the contracts remains being the York-Antwerp Rules 1994.
The Professional Average Adjusters
Within the maritime industry, Average Adjusters belong to a unique and small profession. The first known professional average adjusters practiced in the City of London from about 1800, though there is record that Lord Justice Mansfield, in his celebrated judgment in the case of Lewis v. Rucker in 1761, refers to the fact that:
“I thought a good deal of the points, and endeavoured to get what assistance I could by conversing with some gentlemen of experience in adjustment.”
In his address to the average adjusters in 1935, Mr. Justice Mackinnon said:
“Your profession is a singular one – not merely because the vast majority of your fellow-citizens have not the remotest idea what your duties are; but because, above any other profession that is not actually legal, you are required to have, and in fact possess, a very exact knowledge of a very special branch of the law.”
The pre-requisites of a qualified, professional average adjuster are expertise, experience and independence. With his established reputation of impartiality and background of knowledge, he offers a non-litigious, non-adversarial method for settling claims by acting as an impartial intermediary between the parties concerned. In this respect, the conventional average adjuster has a two-fold duty:
- To the assured and/or the claimants in general average – to see that the claim presented is fully supported by the evidence, and that it is as complete as possible, i.e. that nothing is missed
- To the insurers and/or the general average contributing interests – not to submit, without making an appropriate note of reservation, any item of claim which cannot be supported either in law or in practice.
It should be noted that an average adjustment is not binding upon the parties concerned and it is open to the respective parties to disagree with the average adjuster’s conclusion as to whether there is a claim in principle and/or to take issue with the average adjuster’s treatment of the figures. However, it is true to say that the vast majority of claims go through as adjusted, the adjustment being accepted as correct settlement between the parties concerned. In this connection, a former chairman of Joint Hulls Committee addressing on the hulls claims in the London market said:
“The use of a reputable and highly qualified average adjuster to prepare the claim can significantly speed the agreement of the claim. An adjustment prepared by a respected firm made up of highly qualified individuals will receive favourable treatment by the claims adjusters. While the adjustment may well be queried, the underwriter knows that claims which are not covered by the policy have not been submitted and that the claim preparation is thorough and well researched. This will prevent the unnecessary questioning of the adjustment due to insufficient research of the claim.”
Association of Average Adjusters founded in 1869
“Just as a number of families in primitive society do not form a State, so a number of men, though they perform similar functions, do not make a profession if they remain in isolation. A profession can only be said to exist when there are bonds between the practitioners, and these bonds can take but on shape – that of formal association”
The first formal association of the individual average adjusters took place in London in 1869 at the prompting of the underwriting members of Lloyd’s and the Liverpool Underwriters Association. The aims of the Association were as follows:
- To promote professional standards and correct principles in the adjustment of marine claims by ensuring, through examination or otherwise, that those entering into membership possess a high level of expertise.
- To achieve uniformity of practice among average adjusters by providing a forum for discussion and by establishing rules of practice where necessary.
- To ensure the independence and impartiality of its members by imposing a strict code of professional conduct.
- To provide service to the maritime community by establishing procedure by which advice on all aspects of marine claims may be obtained so as to facilitate their settlement.
The current membership categories are as follows:
- FELLOWS are full members of the Association who have satisfied the rigorous examination requirements of qualification by passing all six modules.
- SENIOR ASSOCIATES have two passes out of three Fellowship modular exams (excluding the practical exam) one of which must be paper F1. In order to achieve Senior Associate status the examinees will still have to attain the 75% pass mark in the same way as average adjusting examinees who are aiming to become Fellows of the Association.
- ASSOCIATES have passed Modules 1 & 2 of the Association’s examinations. This qualification is widely recognised in the marine insurance and shipping industries and is a stepping stone to becoming a Fellow.
The Association of Average Adjusters is the association to which all qualified average adjusters in Great Britain belong, but it has become an international organisation, there being fellows and associates coming from a wide range of countries. On the record, there have been six Chinese qualified fellows, four of them currently being resident in Hong Kong and two in Singapore.
The functions of the average adjuster are principally the following:
- The adjustment of general average.
- The adjustment of claims on policies of insurance on any interest directly or indirectly exposed to maritime perils.
- The preparation of statements of claim against third parties.
- The division of recoveries from third parties, or of proceeds of sale.
- The arbitration of disputes arising in relation to the above or associated matters.
To summarize, the Association is a regulatory body, being charged with promoting and ensuring both the skills and objectivity of the average adjusters. Fellows of the Association are practicing average adjusters who, being expert in the law and practice of general average and marine insurance, and having qualified by examination of the Association, apply their expertise for the benefit of the maritime industry.
It is worth noting that the average adjuster may be appointed by any member of the maritime or marine insurance communities having an interest in the matter concerned and, irrespective of the identity of the party appointing him, he must always act impartially and independently. He may advise any party seeking his opinion on any matter within the area of his expertise, and assist in the collection of general average, salvage, or other security, and in effecting settlements under average adjustments, or otherwise as required.
Following a Maritime Casualty
The average adjuster is usually consulted and asked to formulate an opinion as to where the various liabilities will fall and who will pay under the bills of lading, charter party, insurance policies, salvage agreement, and any other contract which may be in existence. Assume that:
A vessel, insured on hull and machinery, etc. subject to ITC – Hulls 1/10/83, with a General Average Absorption Clause, entered with a P&I Club, and laden with cargo in containers shipped under multi-bill of lading providing for general average in accordance with York/Antwerp Rules 1994, is involved in a serious collision sustaining damage to her stem and forward shell plating, with serious leakage in the forepeak and nos.1 and 2 holds. To avoid any chance of sinking, the master decides to strand the vessel on a generally sandy and sheltered beach. It is considered necessary to discharge part cargo into barges, fit patches and then pump out and refloat with tug assistance. Various salvors offer to refloat the vessel on the basis of Lloyd’s Open Form of salvage contract but, in the interest of economy, the necessary barges, stevedores and tugs are engaged on a daily rate basis. Fire breaks out during refloating operation which is extinguished with fire hoses from the attending tugs with LOF being signed retrospectively. Vessel is towed to port of refuge for necessary repairs, where cargo is forcibly discharged and subsequently transshipped….
Parties to the adventure, the shipowner in particular, are now faced with various problems. The questions in the shipowner’s mind usually include:
- What needs to be done at this stage (upon hearing of the collision and voluntary grounding)?
- Whom do we need to inform/instruct?
- Shall we opt for the Lloyd’s Open Form, or shall we engage assistance on a daily hire basis?
- What are pros and cons of these different types of services?
- Who provides security for any salvage services, and how are the various expenses to be funded?
- Do insurances on average disbursements, shipowner’s liability, or any other interests need taking out? And who will pay the premiums?
- Do we need to appoint a cargo surveyor in the general interest?
- Shall we declare general average taking into account the General Average Absorption Clause in the hull and machinery policy?
- What general average security shall we take from cargo?
- Do we need an admiralty solicitor?
- What about security for the collision and jurisdiction?
- What about pollution liability from either vessel?
- How should we react to time charterer who asks us not to declare general average?
- What is the significance of the fact that the freight is prepaid?
- What is the significance of the remarks about the intentional grounding?
- Will there be 2 deductibles on the hull & machinery policy claim?
- Are the attending tugs engaged on daily hire entitled to claim salvage following their successful efforts made to extinguish the fire?
- What will happen, and what should we do?
- Will this fire mean an extra policy deductible?
- Do we need another set of general average security forms?
- Who will provide security to colliding vessel and what will it cost?
- Who will provide security to salvors and what will it cost?
- Who will provide security to Harbour Authority at port of refuge for possible pollution?
- Who will pay the cost of forwarding the cargo to destinations? Can we abandon the voyage and ask the cargo to take delivery where it lies at its own expense?
- Will the salvors permit the cargo to be forwarded before its security for salvage has been provided? If not, who is to provide such security?
- Do we need to place any insurance on the cargo?
- If so, why? On what conditions? For how much? And who is the assured?
- Suppose the forwarding vessel were to be totally lost on the voyage when carrying the cargo ex our vessel, do we lose any general average contribution they would have paid?
- If so, how can this be avoided?
- Who will draw up specification for damage repairs and take tenders for the repairs?
- Who will know/decide which yards should be asked to tender?
- Who will provide money to pay repair yard for their required advance payment?
- Who provides the funds for progress repair payments?
- Do we have a constructive total loss on H&M policy? [There is a CTL when the cost of recovery and repairing the vessel exceeds the insured value.]
(a) What is the estimated cost of repairing the vessel and what may be included in the computation of that figure?
(b) Can the cost of salvage be included?
(c) Do we have to give credit for any general average contributions received from cargo towards those repairs?
(d) Do we have to credit the scrap value of the vessel?
(e) What is notice of abandonment?
These questions, and many more like them (and those to follow during the salvage and collision proceedings respectively), which may cause a severe headache to the shipowner, are dealt with daily by professional average adjusters as they coordinate the involvement of salvors, superintendents, repairers, underwriters’ surveyors, P&I representatives, lawyers, etc.
The collection of general average security can be a major exercise involving contact being made with several hundred (or more) different cargo interests concerned – receivers, shippers and insurers (also average agents and/or lawyers acting for them), and it is essential to have the full co-operation of the ship’s agents at ports of loading and discharge. Understandably, the average adjuster is often engaged by the salvors in multi-bill cases to assist in collecting the salvage security.
Once the cargo has been delivered, the average adjuster will then circularize the cargo interests to obtain details of any damage sustained by the cargo which could form a deduction to assess the salved and contributory values and/or a claim in general average. The average adjuster will advise the claimants in general average as to what documents/information are required to substantiate their claims.
In the meantime, when the salvage award is published by arbitrator or agreed between the salvors and the property interests, the average adjuster will likely be engaged by the salvors to assist in collecting the payments due from the parties concerned. Then, there follows the main part of the average adjuster’s task which is the preparation of the actual general average adjustment.
Concurrently with preparation of the general average adjustment, the average adjuster is processing the particular average claim on the hull and machinery policy. The first step is to establish whether there is a valid claim under the policy, hence the examination of the terms and conditions of the policy.
Is the cause of damage a peril insured against? In a case like the one assumed herein, with a collision recorded in the log book on a specific date, the cause is clear. However, in many other cases (involving machinery damages, in particular), the cause may not be readily apparent at the time of survey and will require considerable investigation by the assured under guidance of average adjuster with assistance of his technical consultant, with a view to ascertaining if a prima facie claim can be established under the policy.
Generally, in recognition of the cash flow difficulties a major loss can cause, underwriters are willing to arrange a payment on account if certified by the average adjuster. What happens in practice is that the average adjuster will arrange for the cost of repairs (and other major items of expenditure) or in appropriate cases estimates thereof, to be approved by the attending underwriters’ surveyor and he will then prepare a payment on account certificate which sets out the basic facts and figures and recommends a figure which underwriters mat safely settle without prejudice on account of the final claim. In the certificate, the adjuster also states where the funds are to be paid and in some cases the funds may be channelled through the client’s account with the bank of the adjuster.
The average adjuster will advise the assured what documents and information will be needed to substantiate his claim for the preparation of the adjustment.
The final adjustment of general and particular average will be a self-contained document with all relevant evidence being immediately available with a view to providing:
(a) Background details that enable the parties concerned to understand the circumstances leading up to the casualty, as well as the casualty itself;
(b) Key details relating to the policy coverage and relevant provisions concerning general average in the contracts of carriage;
(c) A concise summary of the liability position – apportionment of general average and application of general and particular average claims on the hull and machinery policy of insurance.
The adjustment format of a big average adjusting firm, which is commonly adopted with modification by adjusters, breaks the adjustment into several “free-standing” sections, starting from a brief over-view and then moving into progressively greater level of details; like a layer cake – the light icing of key facts is on top and the heavy details are at the bottom. The layers are made up as follows:
- The Front Page – The first page is a summary of everything that is in the adjustment. The headings will be similar in every case but there can be variations as circumstances require – Vessel, Voyage, Casualty, Insurances, Casualty Summary, Adjustment Summary, Recovery, Additional Information, and Claim Summary. The purpose is to give a single snapshot of the case – what is usually called an “Executive Summary”.
- The Adjustment of Claim – This section is the core document which must be self-contained with a summary of facts together with explanatory notes making the parties concerned to feel confident that all potentially difficult or controversial areas have been drawn to their attention and the adjuster’s treatment explained. If something is critical to a claim it should be summarized or quoted in full. It includes a summary of the disbursements including the adjuster’s charges which form part of the claim/loss (which are classified by the adjuster between general and particular average and so forth), followed by the apportionment of general average and the application of the claims to the policy – again this is to make it possible for somebody to get a full picture.
- Appendices – These usually consist of:
(a) Reports and correspondence and
(b) Disbursement details where accounts covering the damage repairs and other expenses are shown in abbreviated form with each item allocated either as claimable or being disallowed.
(c) Accounts (for repairs and major expenditure)
(d) Additional appendices, for example including the apportionment of general average over individual cargo interest can be shown as necessary.
(e) Financial balance
A further major exercise will be for the average adjuster to collect debit balances due from cargo interests world-wide and take care of the sums due to the creditors under the adjustment.
In the meantime, the average adjuster will draw up a statement of claim against the colliding vessel. In this connection, it is interested to note that in the case of The Normanstar 1929 the adjuster’s fees for preparing the ship and cargo claims for the purpose of the reference to the Registrar of the Admiralty Court were allowed as part of the costs of the reference, it being held by Mr. Justice Hill that the course adopted had saved legal expenses which would have been allowed as costs.
Following the conclusion of collision settlement, the average adjuster will draw up a further adjustment dealing with:
- Claim under the Collision Liability Clause (in terms of the H&M policy and P&I cover) in respect of the damage done to the colliding vessel which the assured is legally liable;
- Division of the Recovery and interest thereon from the colliding vessel between various parties concerned;
- Apportionment of costs in the collision proceedings.
Again, in the case discussed above, the average adjuster will be engaged in distributing the net recovery funds attaching to the cargo interests who have paid their contributions under the previous adjustment of general average.
Under English law and practice, where the appointment of a professional average adjuster can be justified, the cost of adjustment would either be shared amongst all the interests in general average or paid solely by underwriters in cases of claim for partial loss on the policies of insurance.
As noted earlier, the shipowner is not obliged to employ a professional average adjuster and in general average cases, the appointment is generally justified under one of three headings:
- At common law, i.e. through customs
- By implication where the York-Antwerp Rules apply
- By way of general average security in the form of Lloyd’s Average Bond and/or Average Guarantee
Shipowner are similarly not under any contractual obligation to present their partial loss statements to underwriters by using the services of a professional average adjuster. However, if they do so, the adjustment charges are customarily settled by underwriters as part of the claim under English practice, by virtual of an implied contractual obligation under the policy. Apparently, to avoid unnecessary arguments between the assured and insurers (particularly where risks are placed in insurance markets that do not follow the Anglo-Saxon model for marine claims settlement), a specific Adjusters clause is commonly found being incorporated in the policies of insurance, thus making it a contractual liability of underwriters to reimburse the adjustment fees reasonably incurred.
III – INDEPENDENCE AND IMPARTIALITY
The concepts of impartiality and independence referred to the Association of Average Adjusters above are of paramount importance in the profession.
Impartiality is not favouring one more than another, being unbiased. It is one of the cornerstones of the profession’s survival. The all-time wise words of a past Chairman of the Association of the Average Adjusters:
“He (the average adjuster) is nothing unless impartial. If he is to be useful, he must be independent. Should he prove so, he becomes the means of preventing questions capable of being solved amicably, from rushing precipitately into litigation.”
It is contended that strictly (legally) speaking, an Average Adjuster is the agent of the party who appoints him and therefore the adjuster is partial. In most general average cases, the shipowner appoints the adjuster but it is submitted that he does so on the basis that he is appointing someone who will, whether he likes it or not, act impartially in accordance with the rules of the Association of Average Adjusters. Indeed, it is believed that by virtue of his position in a general average case, the average adjuster can incur certain liabilities in tort to other parties to the common maritime adventure. Hence, the adjuster would on the one hand endeavour to give the best professional advice to the shipowner but on the other hand endeavour to ensure that the interests of the other parties to the adventure are not prejudiced.
To help preserve the average adjuster’s impartiality, the parties concerned must be convinced that impartiality is desirable and the adjuster must have the confidence of the parties concerned, in vast majority of cases, the assured and insurer.
Because the shipowner appoints the adjuster, who would understandably be in favour of appointing an adjuster who is prepared to be biased in his favour, there have been criticisms of adjusters having been driven into the arms of the shipowners, though in the majority of cases they are not justifiable, insofar as they involve Fellows of the Association of Average Adjusters. Regrettably, it is not surprising to see, however rarely, cargo insurers look to average adjusting practitioners who would be prepared to challenge in adversarial manner every single allowance made in the adjustment of general average, thus disgracing the decent image of average adjusters.
Reputable professional average adjusters, whilst possessing a wide variety of skills and a breadth of expertise concerning all forms of maritime claims, having a general knowledge of law, do not act as paid advocates; also they ought not to be constrained by friendship, prejudice, or fear.
Furthermore, it is a matter of great importance that the average adjusting firm is completely independent and entirely owned and controlled by the working Principals concerned, there being no outsider financial interest and the adjusting firm is not involved in any business which might impair their impartiality. Unfortunately, in the commercial world, it has become inevitable to see acquisitions of average adjusters by public listing companies, etc. where other subsidiaries within the same group are involved in activities giving rise to conflicts of interests. This could arguably depreciate the value of average adjusters, although it is anticipated that repectable adjusters who have lost their independence will handle matters professionally when and where a conflict of interests arises.
IV – AVERAGE ADJUSTING IN GREATER CHINA
It appears that the profession was first introduced to the Far East in the mid 1920’s when Mr. William R.M. Stevens of Messrs. William Richards & Son, founded in 1813, arrived in Shanghai, who, as soon as possible, opened his own office there. After the Second World War, Mr. Stevens set up the first average adjusting firm in Hong Kong in 1945, being subsequently joined by his son, Mr. Nigel Stevens, who was born in China.
William Richards & Son, and another leading firm, Hogg, Lindley & Co. coincidentally opened their respective offices in Hong Kong in 1965. They, however, merged in 1969 to form a separate partnership, Richards Hogg International to develop on a joint basis their world-wide interests. In the meantime, Stevens lined up with William Elmslie & Son and changed its name to Stevens, Elmslie & Co. whilst Frank B. Hall, an American insurance broking firm with average adjusting arm opened an office in Hong Kong.
The Department for Average Adjustment under the Legal Affairs Department of the China Council for the Promotion of International Trade was set up in Beijing 1969, to handle general average claims. Indeed, in mainland China, average adjusters are referred to as “general average adjusters”. Unlike the traditional London type market, the insurers in mainland China have a different system for dealing with local hull claims – a direct settlement between the insurer and the assured. Only in very rare occasions are the services of professional average adjusters utilized on policies of insurance claims.
It is believed that the first professional average adjusting firm to enter Taiwan was Stevens, Elmslie & Co., shortly followed by Richards Hogg International in 1975 using Overseas Adjusters & Surveyors Co., Ltd., as the trading name. Stevens, Elmslie ceased doing business in Taiwan in 1991.
It is worth mentioning the great efforts made by Richards Hogg International in promoting its local staff without reservation and offering training courses on marine claims to the shipping/insurance community world-wide. Indeed, virtually all the Chinese fellows of the British Association of Average Adjusters received on-the-job training at this firm. Mr. Raymond Wong (王德超) qualified by examination in 1980, Mr. Christopher Tang (邓炎祥) in 1982, Mr. Edward Lau (刘世安) in 1985, Mr. Benson Chiu (赵国坤) in 1992, Mr. Yibing Xu (徐义斌) in 2008, and Mr. Matthew Cao (曹傑) in 2015.
The fast growth in shipping resulted in few more foreign firms opening offices in Hong Kong during late 1970’s and throughout the 1980’s. This included Francis & Arnold, Manley Hopkins Son & Cookes, G.W. Cockrill, London Ltd., and R.K. Hastings & Co. Apparently, all ceased from doing business in the early 1990’s and no longer exist in the region now. Meanwhile, Richards Hogg International and the Department for Average Adjustment of the China Council for the Promotion of International Trade, Beijing formed a cooperation based in Hong Kong in 1985 leading to the subsequent establishment of a joint venture company, Dari Co., Ltd. in 1993.
Following a series of acquisitions/mergers and closures, the former brand names, Richards, Stevens, Hogg, and Lindley together make up Richards Hogg Lindley, trading under Charles Taylor plc from 1998 onward, which, after having merged Dari Co., Ltd. into its operation in 2012, became the only professional average adjusting firm in the Hong Kong SAR. Having only one average adjusting firm in an international shipping centre is not recommended for the profession but this remained the status quo until 2015 when an independent average adjusting firm, Asia Maritime Adjusting (Hong Kong) was set up in Hong Kong, followed by Asia Maritime Adjusting (Shanghai) in Shanghai where Charles Taylor Adjusting has had a joint venture company since 2001.
Currently, there are one State owned average adjusting department, Department for Average Adjustments in Beijing, with offices or adjusting centres (as they call it) in Shanghai and Tianjin, two genuine adjusting firms in Shanghai, one in Taipei, and two in Hong Kong. Whilst needless to say, there are well experienced adjusters in all these locations, we only have 4 fully qualified Fellows, 2 Senior Associates and 4 Associates of the British Association of Average Adjusters practising under professional average adjusting firms, all except 2 Associates being based in Hong Kong:
Hong Kong has maintained its leading position in Greater China and, indeed, virtually all the adjusters currently practising in mainland China and Taiwan received training in Hong Kong. Comparing with Singapore (which appears to have 4 professional average adjusting firms with 3 Fellows, no Senior Associate, 4 Associates and 4 adjusters over 20-year experience), Hong Kong has less firms but more practising adjusters with qualification (by examination) of the British Association of Average Adjusters.
V – HONG KONG AS AN INTERNATIONAL AVERAGE ADJUSTING CENTRE
As submitted earlier, Hong Kong has been adjusting averages since 1945, and with its highly qualified adjusters having had work experience in major shipping and insurance markets, and a great amount of effort going continuously to the training of adjusting staff and claims practitioners (for the benefit of the marine insurance industry), has evidently acquired a considerable reputation internationally.
In the foreseeable future, Hong Kong remains the right place for adjustment of general average and hull claims in the Asia-Pacific region. Obviously the vast market to promote average adjusting business is in mainland China. It is now up to the average adjusting practitioners to keep moving forward proactively and constructively to convince the market of the usefulness of the profession at affordable prices. Through co-operations that the current average adjusting firms in Hong Kong have and will have with colleagues and counterparts in mainland China, it will not be in the too distant future to see another Far East adjusting centre, probably in Shanghai.
Adjustment of General Average
It is common to see standard forms of contract of carriage contain clause providing for general average to be adjusted in London where, needless to say, many highly qualified adjusters are based. However, increasingly there are contracts of carriage which allow Carrier an option to decide where the adjustment should be drawn up. It is widely accepted that in absence of a specific contractual provision, the adjustment will be stated at the port of destination. Furthermore, the parties involved may agree to amend the place of adjustment.
Whilst English is the recognized language for shipping, the Chinese language has become popular doing business in China, a vast market; Hong Kong is fluent in both languages.
Hong Kong should not feel shy to seek support of shipowners and charterers directly and/or through shipbrokers, encouraging/persuading them to consider to adopt the following general average wording in bills of lading and charter-parties respectively:
“General Average shall be adjusted in Hong Kong or at place at Carrier’s option, according to the York/Antwerp Rules, 1994, and as to matters not provided for by these rules, in accordance with the law and practice obtaining at the place where the adjustment is drawn up.”
Adjustment of Hull Claims
Any hull claims system should have as its’ main objectives the following:
- Speed of settlement
- Economy of settlement
- Accuracy of settlement
- A satisfied Insurer (and Re-insurer)
- A satisfied Assured
The non-adversarial approach of highly qualified average adjusters would help achieve these objectives. An important issue which the average adjusters need to bear in mind is that Underwriters are always seeking to reduce the overall costs of dealing with their claims, hence the adjustment charges must be “value for money”.
It is becoming norm to have an Adjuster clause incorporated at the request of the assured in the policies of insurances on hull and machinery taken out in Hong Kong and Taiwan, an example being as follows:
“The Assured have the option to appoint
- Richards Hogg Lindley, or
- Asia Maritime Adjusting (Hong Kong), or
- A Fellow of the British Association of Average Adjusters
for preparing claim statement and/or average adjustment etc. The Underwriters shall be responsible for payment of reasonable fee of the average adjusters irrespective of whether a claim ultimately arises under this insurance.”
Insurers in the mainland China who underwrite overseas risks would have experience in using professional average adjusters who must not miss the golden opportunity of demonstrating the value of the Adjuster’s use and duty.
VI – CONCLUSION
The profession has changed with the passage of time; yet the unique skill and expertise of highly qualified average adjusters must endure to meet the changes in the requirements of a modern shipping industry and insurance market. It is simple: the profession must convince the market of its usefulness.
In conclusion, this paper is best defined by the most frequently quoted expression of the position of the average adjuster:
“The use of the adjuster individually is to grease the wheels of commercial machinery, to do work which neither the assured nor the underwriters have either time, training or inclination for, in such a manner as to expedite settlements without resort to the expensive machinery of law: His duty is to act fairly to both parties to the contract of insurance or the contract of carriage, to set down all material facts, withholding nothing of importance, to present the figures of the suggested settlement in such a manner as to be capable of being easily grasped, and above all, in all cases wherever definite law or practice is not clear, to place the matter before the parties interested in such a manner as to facilitate an agreement between them. Adjusters acting in this sense well deserve the name of beneficent parasites.”
It is with earnest hope that those committed professional Average Adjusters currently resident in Hong Kong will take the lead working together with their counterparts in the region, aiming for this worthy goal as rounded off by Mr. E. R. Lindley: “Adjusters acting in this sense well deserve the name of beneficent parasites.”
 Mr. Raymond Wong is the first Chinese Fellow of the British Association of Average Adjusters, starting his career in average adjusting in 1966; now Principal of Asia Maritime Adjusting (Hong Kong) – www.averageadj.com
 It is recognized that claims handling is the “shop window” of insurance
 Wavertree Sailing Ship Co. v Love (1897)
 Revised extract from the paper on the subject “Adjusting Averages” compiled by Mr. Wong in 2010.
 Mr. Mark Brockbank
 Information collected from the publications of the Association of Average Adjusters
 “The Professions” by Carr-Saunders & Wilson, quoted in the “100 Years of the Association of Average Adjusters 1869-1969”
 Website of the Association of Average Adjusters – www.average-adjusters.com
 Richards Hogg Lindley
 As submitted in para 313 of Lowndes & Rudlof on General Average and York Antwerp Rules – 10th edition
 Chandris v Argo Insurance Co., Ltd. (1924); para C.34 of Lowndes & Rudolf on General Average and York-Antwerp Rules – 14th edition
 Castle Insurance Co. v Hong Kong Islands Shipping Co. – The “Potoi Chau” (1984)
 Mr. Manley Hopkins in his chairman’s address in 1875
 Association of Average Adjusters
 Richards Hogg Lindley
 Asia Maritime Adjusting (Hong Kong)
 Department for Average Adjustment
 Asia Maritime Adjusting (Shanghai)
 Charles Taylor Adjusting
 Overseas Adjusters & Surveyors Co., Ltd.
 E R Lindley, in his address to AAA in 1904
 C J Barstow, former Chairman of AAA in this Lecture on Hull Claims Services in 1996