The Role of the Average Adjuster
Average Adjusters are experts in marine insurance and law, who may be appointed by any party in a marine claim or dispute. Irrespective of the identity of the instructing party, the Average Adjuster is bound to act in an impartial and independent manner.
The following description of that role was given by E.R. Lindley in 1904 and remains true today:
“The use of the adjuster individually is to grease the wheels of commercial machinery, to do work which neither the assured nor the underwriter have either time, training or inclination for, in such a manner as to expedite settlements without resort to the expensive machinery of the 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”
By experience and training, Average Adjusters are therefore problem-solvers and mediators. Fellows of the Association of Average Adjusters have demonstrated their expertise by rigorous examination.
The Founding of the Association
The second half of the 18th Century saw an explosion in maritime trade and associated areas of commerce, not least marine insurance. It appears that claims were referred to brokers or insurers who were respected for their knowledge; Lord Justice Mansfield in his judgement in Lewis v Rucker in 1761 said that he “endeavoured to get what assistance I could by conversing with some gentlemen of experience in adjustments”.
That this informal system was found to be unsatisfactory was made clear by Weskett’s scathing comments in his Complete Digest of the Theory Laws and Practice of Insurance, published in 1781. He lamented the lack of any proper system for dealing with claims, finding numberless instances of “unskillfullness, negligence and error” and despairing that
“….litigation is become so rife, there is necessity, how ever strange it may appear, for the almost daily attendance, which may be observed, especially in term time, of no less than 4 or 5 Attornies at Lloyd’s Coffee-House! What a degradation is this of mercantile character and abilities!”
The beginning of the 19th Century saw the emergence of the first known professional average adjusters, William Benecke and Robert Stevens, who practised in the City of London from 1800 onwards. Other adjusters there were, or followed soon afterwards, but it is difficult to identify them because there was no profession of average adjuster, as such. All early adjusters described themselves variously in directories as merchants, accountants, insurance brokers, solicitors or arbitrators and not until 1840 did the Post Office London directory give a classified entry for the profession. Some idea of the novelty of the style “average stater” can be gleaned from the case of Pirie v. Steele in 1837. William Richards was one of the average adjusters called as witnesses, and as he is mis-reported to have said, “I am a taker of averages”. Incidentally, he continued to call himself an accountant in the directories until `1842.
The first formal association of the individual average adjusters practising in this country took place in 1869, at the prompting of the underwriting members of Lloyd’s and the Liverpool Underwriters Association. When average adjusting as a separate profession was in its infancy, there was very little in the way of established law to guide the practising adjuster, and consequently many points of practice has to be decided in accordance with custom. Some of these customs were subsequently ratified by legal decisions, but others were disapproved, and it became evident that unless steps were taken to establish a reasonable measure of uniformity among average adjusters, the profession would fall into disrepute.
The initial purpose of the founding of the Association in 1869 was to arbitrate on adjustments which has been disputed. To this end the Association maintained an office at Lloyds, however, it would seem that the scheme was little used. Therefore the Association redirected its attentions to “The promotion of correct principles in the adjustment of Averages and uniformity of practice amongst Average Adjusters and the maintenance of good professional conduct”.
With its new objectives, the Association’s first task was to consider the areas of divergency in practice, and divide how the various so-called “customs” could be brought together into a uniform, if not universal, practice. This aim was largely achieved by the Association in the first fifteen years of its existence, by a two-fold approach: the collection of refinement of the Customs of Lloyd’s and the adoption of Rules of Practice, relating to the adjustment of averages and the duties of adjusters in connection therewith.
Members of the Association also played a leading role in the search for international uniformity in the adjustment of General Average which resulted in the first York-Antwerp Rules of 1877.
The Association has continued to play an important part in various Committees in the London Market and has close relationships with other international associations and insurance markets. Most recently an Association working party has been closely involved in the drafting of new Institute Clauses.
The Association promotes 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.
It aims to achieve uniformity of practice amongst Average Adjusters by providing a forum for discussion and by establishing rules of practice where necessary. It ensures the independence and impartiality of its members by imposing a strict code of professional conduct.
Finally, it provides a service to the maritime community by establishing procedures by which advice on all aspects of marine claims may be obtained so as to facilitate their settlement.
The Association has two sets of Rules.
The Rules of the Association relate to the constitution and regulation of the Association.
The other set of Rules maintained by the Association are the Rules of Practice which have been established to achieve uniformity of practice in the adjustment of marine insurance claims and general average.
Both sets of rules can be viewed, printed or downloaded.