A dull and boring insurance investigation.

Well, sort of...

We had a fire in our shop on the 13^th of November. We lost about 118 thousand bucks worth of frozen meat inventory, about 20 thousand bucks worth of other stuff that happened to be in the shop. Stuff like order packing materials, 20 chest freezers, two 10X20 foot walk in freezers, a bunch of tools, a brand new 28,000 Watt generator that would run the whole shop in case of power outage, a whole bunch of other stuff that was almost new and needed for the business and a bunch more tools. The shop building itself was also a total loss. There was also a 2019 Ford Transit van that I dearly loved because it had the 3.5 liter Ecoboost engine in it and that sucker would take off from a standing start at the top of an on ramp and be going 100 mph by the time it hit the bottom of the ramp and hardly break a sweat doing it. I never had ANY trouble merging with traffic no matter what load I was carrying. There was also a 2017 Dodge RAM pickup that I had personally put about 130K miles on and it had never ever let me down. It did not deserve to be burned up any more than the van or any of the other stuff did.

I vividly remember running outside after Caroline said “There’s something on FIRE out there!” I ran toward the shop thinking maybe I could salvage the pickup. Got about 40 feet away. The fire was just licking at the tops of the van and pickup. It was hot. I realized this might not be smart. Turned around and started walking away saying: We are FUCKED. Realized I should have some photos for insurance. Pulled out my phone and turned around and shot the below photo. From the time I saw the flames just licking at the tops of the van and pickup and this photo was about 15 seconds. That sucker was moving FAST. We retreated back behind the house because freezers were starting to cook off inside the shop with loud explosive sounds and I didn’t want to be anywhere near those vehicles if they exploded. They didn’t explode but they were absolutely, totally, burned out within about an hour when the fire department left.

We don’t know what started the fire but I am starting to have inklings about it. I will get to that in a future post.

What this post is about is the shock and part of the insurance aftermath caused by finding out that some fool (me) had only insured the ‘business personal property’ in the shop to a total of 75,000 bucks. That was probably how much inventory we had when I first started looking around and getting serious about putting up a shop building. This happened to be at a time when our inventory was at pretty much it’s yearly low point.

So OK, we look at the policy after the fire department left and find out that I had only had 75,000 bucks worth of insurance. Against about 140k worth of stuff… BUT, there is a 25% increase available if you can prove your inventory is seasonal. I.E. if you get more inventory in at certain seasons and have less at other seasons your inventory. 25% of 75K is 18.75K, so nothing to sneeze at.

Well, that should not be a problem. We immediately ran an inventory report to find out where we stood. 117,889 and some change was the worth of meat that got burned up. We hadn’t done the inventory of all the other stuff yet.

The insurance company wanted an inventory of all the stuff inside the shop so the first thing we did was sit down and make a list. We looked at photos taken inside the shop. We looked at invoices of stuff bought. We did a pretty thorough job of it.

So now we have the starting figures of what was in there and it is worth WAY more than the 75K that was on the front page of the policy.

So how about that seasonality thing?

Now all we have to do is run reports for each of the months going back through the year. Wait, what? We can’t do that? I thought that computers could keep track of all sorts of data and regurgitate that data at any time at anybody’s whim?! Nope, not this program. Said reports are not available. You can run a Product Sales Report for every month back to the dawn of time but you can’t do the same for an inventory report. I suspect that the writers of our farm sales program did not ever have to dig back through and come up with inventory reports from the past. Inventory is changing all the time after all. They probably never had a catastrophic fire to deal with. Or they were smart enough to run monthly inventory reports and stash them somewhere…

I spoke with the insurance people and they pretty much agreed that we had more than 75K worth of inventory in the shop at the time of the fire. There were some questions about where the numbers came from on the existing inventory sheet. I.E. how did you come up with these amounts of value of each pound, etc. That information was pretty easy to come up with and I had saved spreadsheets done at the time of doing those figure-outs.

Note to people who have never worked with inventory before: The inventory value is NOT the price you are going to sell your item for. It is how much that item cost you to produce. That value in some cases can include transport, but in other cases transport doesn’t count. It can get kind of complex.

In our first in-person conversation with the claims adjusters, I wanted to get something out of the way. I wanted to find out what kind of relationship we would have with the insurance company. I didn’t want to be overly confrontational but I did want to know up front. I told them a story from when I used to work for a church.

Back in the day, I used to work for a church. For a time I was the guy who sent out all the bulk mail. If you have ever been on a mailing list that has to do with donations like church or political donations, you know that a LOT of communications go out about getting money from people. This was before computers were a big thing and there were no texts or internet for emails. There was only direct mail. Our church had a usual mailing list of about 60K and a ‘big’ mailing list of about 250K. I would once in a while send out 300K worth of mail in a single week. I got to where you could give me a name and I could tell you their zip code or at least the area of the country they lived in. It was a LOT of mail.

As a result of all this mail going out, I would spend time at the post office. My job was to oversee getting the stuff printed, get it run through the address labeling machine, sort it by zip code, bundle it by zip code, bag it by areas and bring it to the post office for mailing. There were inspectors there who would go through a bag or two of each mailing and check to see if the sorting job was done right or not. If it was done right, it would go into the sorting machines and be sent to where it was going. If it was wrong, we would have to fix it. We did NOT like going through a 60K mailing and correcting the errors. We got pretty good at sorting and bundling and labeling bags correctly.

I got kind of familiar with a few of the inspectors. One of them we will call Ben (I don’t remember what his name actually was). We would chat a bit while he was going through the mail checking it out. I had been studying about purposes and how someone’s purpose can affect what they do in life and how they approach their job.

I asked him: What is the purpose of your job? There was no hesitation at all: To stop as much mail as I can.

I was flabbergasted. To stop as much mail as you can?!? Really? It is not to ensure that the mail that hits the system is done accurately so that it goes through the system smoothly or anything like that?

Nope, it is to stop as much mail as possible. That is what they taught us in mail inspector school.

I tried to talk him out of it but he stuck to his guns, that was the purpose of his job.

Then I asked the main fire claims adjuster guy what the purpose of his job was. He was kind of taken aback by that, kind of gave me a look and went on to other things. His look was kind of like: Who the fuck are YOU to ask me that? And: Who is this guy? And maybe a bit of: What IS the purpose of my job here?

I didn’t want to get any more confrontational than I already had so I let it drop, noting to myself that a no answer would be definitely bad news.

As we got done with our meeting, standing up and ending off, he shook my hand and said that the purpose of his job was to ensure that the people he dealt with were treated fairly and ethically and per their individual policies. For all I know he looked that up on his phone or had the guy who was with him look it up on his phone while we continued the meeting. That was totally fine with me. I now knew what playing field I was operating on and could go with that. At least his purpose wasn’t to save the insurance company as much money as possible. Or maybe to ‘stop paying as many claims as possible’.

Then I asked the claims adjuster what was going to be needed to prove seasonality: 25% of 75K is 18.75K and that would go a long way toward replacing our inventory. He said that we would pretty much need to have those monthly inventory reports. At least have some way of telling how much the inventory was worth on a month-to-month basis. I mean we could make any claims we wanted but like the tax man, he was going to need receipts.

I said I could probably work from the meat processing invoices for meat coming into the shop which had a pounds column on them and also the product sales reports for every month because they had a pounds sold column on them and come up with a running total for the whole year. The running total could then be sampled at the end of every month and we would get the inventory value for that month. He seemed fine with that.

I ran all the 2024 monthly sales reports and put them into a single spreadsheet. Then I chased down all of the meat processing invoices for the year and entered that data into the spreadsheet as well. I had to ask the processors for invoices I couldn’t find. I had our financial records so I knew how much money had gone out but I didn’t have accurate pounds amounts for all of the invoices.

I had to do a lot of number crunching to figure out approximately how many pounds of various cuts of chicken there would have been since all the chicken invoices had was a total pounds figure. I.E. 350 chickens at 5.6 lbs each is 1960 lbs of chicken. But how was it cut up? The invoice had figures like: 50 birds left whole, the rest cut into 9 pieces. 2 wings, 2 breasts, 2 thighs, 2 legs and a back. OK, guess what percentage of the carcass is legs, thighs, wings, breasts and back. Luckily I have handled a good bit of chicken so I think I was pretty accurate. We had to go with that. Bottom line is that the total pounds were known to a high degree of accuracy because we knew the number of birds and their average carcass weights going in. The total of the cuts and backs and whole coming out had to equal total weight of the birds carcasses going in. Since the cost of a breast is the same as the cost of a back, what the cuts were didn’t matter that much but having an estimate would be better than not having one.

We used to have the backs tossed by the processor but then started keeping them because we had to pay for the processing anyway. Perhaps we could one day figure out a way to make them into chicken soup or chicken broth and sell that. I did find a place that would make chicken soup but they wanted amounts in the truckload to even start with. Not us… In the meantime, we could sell a few at less than the cost of processing and donate the rest so someone or something could get some good out of them and they wouldn’t wind up in a landfill somewhere turning into methane.

I put all the data together, ran the total and came up about 60K short. Wow, off by about 50%!

I spent about 20 days-worth of ‘spare time’ going back through all of the invoices. I scoured for more invoices. I asked for complete invoice records from all of the processors. I went through my financial records looking for other invoices. It turned out that I had missed a few things but none of them was major or basic. None of them came anywhere near 60K worth of inventory.

This was bad.

This meant that my computer reports were wrong. If my inventory reports were faulty, then my original claim was off. Maybe the insurance company wouldn’t even pay the original 75K. Maybe they would only pay the 60 K I had come up with. I lost some sleep over it. I didn’t have anything to check my calculated ‘back inventory’ reports against to check their accuracy.

But I DID have a month or two of inventory reports and sales reports that occurred after the fire. I could check those for accuracy and see if there were discrepancies. I spent a day doing that. There were no discrepancies. The computer reports were accurate for the times I could check. They were reporting the data they were given accurately and there were no strange calculations occurring in the bowels of the computer that were coming up with weird figures.

So… I had checked all the invoices for the year and at least had pounds figures that were pretty accurate. I had checked my figures for values in and values out. I spotted more than one error in those bits of investigation but still couldn’t come up with anything that could cover 60K worth of inventory.

Since the computer reports were accurate, that meant that the data going in had to be inaccurate. So I went back through all the invoices for meat coming in via invoices and all the figures for meat going out in sales reports. I found a few more small errors but they were very small.

The only solution was that there was a bunch of meat that hit the inventory but wasn’t on the invoices. I was CERTAIN that was impossible. Inventory is logged immediately after it comes from the processor. Even when it goes to cold storage instead of the farm, it gets logged into inventory as soon as possible after it leaves the processor. It was night time and I needed to get some sleep or I would be worthless the next day so I went to bed. Note that being CERTAIN of anything while you are trying to figure shit out is a very good way of being wrong.

I woke up in the early morning with the thought: Maybe there was stuff that got processed toward the end of 2023 but didn’t get into the inventory until sometime in 2024. This would have been an error in inventory entry but it was technically possible. This was a pretty Duh! moment. But then I have never professed to be the sharpest tool in the shed. I have taken several IQ tests and come up around 150 most of the time but I am pretty sure that IQ doesn’t test everything and I do enough stupid shit to know that I might be sharper than some maybe, but sharpest? Nope. Not even close. I do have a super-power though. I am pretty stubborn and confident. I know that given enough time and enough banging my head against the wall I can figure most shit out.

How was I going to check inventory entry dates from a year ago without having inventory reports? Well, our computer program had recently put in a new feature. I could look at specific product items and see any changes made in the inventory going back over time. I did not relish doing that for 100 different items. That would be a weeks worth of work just in itself.

I figured I would start with the big poundage items. With beef, that is ground beef. About half the pounds we sell is ground beef. I looked at ground beef inventory changes and sure enough, on January 5^th 2024 there was an entry that said we had put 2072 lbs of ground beef into inventory. That is a whole pallet of ground beef. I had been through the invoices enough times to know that there was no invoice or BOL or inventory spreadsheet entry for a whole pallet of ground beef going into inventory around that time.

Now I went looking for any invoices from the end of 2023 that might have had that much beef on them. I knew we had processed 20 head in one go at the end of 2023 but I had been CERTAIN that meat got into inventory before the end of 2023 and was on the year-end report. But here was a whole pallet of it getting entered after the first of the year. Where is the invoice! I found the processing invoice and an invoice where we had hired an outside company to do shipping of 7 pallets from the processor to cold storage for us. They moved the stuff on the 27^th of December or thereabouts. Hmmm. I had earlier been doing the hauling myself but decided that 7 pallets at once could be done by someone with a bigger truck. It was Christmas time after all.

I looked for the BOL and found one hiding in the downloads folder for 5 pallets of beef. One of those pallets had 2072 lbs of ground beef on it. There were other pallets as well. I looked at other inventory adds dates and found some. I verified that I had picked up meat from cold storage on those dates. I checked a few other of the pallets of ground beef and found that they had been entered into inventory shortly after the first of the year also. The pounds in matched the computer store program individual product records exactly.

I also checked the ‘cuts’ pallets and the pounds on those matched up exactly also. I.E. 275 pounds of ribeye went into inventory on the 5^th of May. Yep, here it is on the BOL, 275 lbs of ribeye on that pallet. Checked a few other products from that pallet and found they had also gone into inventory on the same date.

So I breathed a huge sigh of relief, went out to get some more boxes of firewood to celebrate (I think it was about -4 degrees that day and we were going through a lot of firewood) and then entered all of that weight. Still came up about 6K short.

Well… the shipping invoice said there were 7 pallets but there were only 5 pallets of beef. Was there any pork? Checked bacon since bacon is an ‘always’ on cutting orders when pork is being processed. Yep, here we go. 7 January, 275 lbs of bacon. Find the BOL. Oh yeah, here it is in the downloads folder. Been sitting there since 6 January 2023. It might have even been printed off but the numbers didn’t get into inventory before the first of the year like they should have.

Entered those two pallets of pork and bingo, I was within 2K of the value that was in the shop when it burned. That probably would have been close enough but I hadn’t figured in any ‘shrinkage’ yet. Inventory shrinkage is usually due to employees stealing stuff, or breaking stuff. In our case it comes mostly from packages that have been pin-holed at some point and lose their vacuum. The product is still good but we don’t usually sell it because customers are quite often iffy about eating it. It keeps us with more meat in the house than we can eat ourselves anyway, so…. No great loss. I did a small calculation based on what would bring the report to where it needed to be and came up with taking off 4 tenths of one percent every month for shrinkage. I do not know what the amount of shrinkage due to holed packages is, but 4 tenths of one percent sounds good and is probably pretty accurate so we went with that.

The report wound up about 40 bucks off what the inventory report run just after the fire said.

I sent it off to the insurance company and now we are waiting for a check. I am sure there will be some back and forth before a check appears but I am pretty confident that my 1800 line spreadsheet covering every pound into inventory and every pound out of inventory for the year of 2024 is pretty accurate.

By the way, the report does absolutely show seasonality so we should be able to get that extra 25%.

No worries.

SV