Adjustment of Average is a term used mainly in Marine Insurance, but also in Fire Insurance, to denote the ascertainment of the amount which the insured is entitled to receive under the policy, and of the proportion of the loss to be borne by each underwriter. For the principles on which this adjustment takes place, see INSURANCE (Marine and Fire). It is generally done by the brokers or the agents of the assured, or the matter may be referred to arbitration. The nature and amount of damage being ascertained, an indorsement is made on the back of the policy, declaring the proportion of loss falling on each underwriter; and on this indorsement being signed or initialled by the latter, the loss is said to have been adjusted. Unless made under a serious mistake as to facts, this signature or initialling binds the underwriter both in a question with the insured and with the other underwriters. Adjustment of General Average is a complicated and technical process conducted by experts. See AVERAGE.
In the United States, the adjustment, to be binding, must be intended by the parties to be absolute and final. No specific form is necessary; it may be made by indorsement on the policy, by payment of the loss, or the acceptance of an abandonment. Fraud on the part of either party will vitiate an adjustment. If one party is led into a mistake of fact by the fault of the other party, the adjustment will not bind him.