SALVORS & FOOD MANUFACTURING LOSSES
Chad Foster, President
Chad Foster & Associates, LLC
Working content losses for carriers or self-insured’s always involves the same plan of attack – separate the damaged from the undamaged, and inventory the contents with the insured by type – raw materials and supplies (RM&S), work in process (WIP), finished goods (FG), and depreciable contents (FF&E), should any of these types be involved. The most optimum time to denote the degree of damage is while the inventory is being taken. Any involved finished goods that are sold need to be denoted as well, as these may be afforded a selling price valuation, versus replacement cost.
But what is the effect of the above actions when an outside controlling authority is involved, such as in a food manufacturing loss? In most instances a representative from the Food Safety Division of the State Department of Agriculture (DOA) will be notified by the insured, and usually this manufacturer/insured has an assigned DOA representative familiar with the site and the people therein. If the DOA has not been notified, the insured needs to perform that task prior to the salvor’s actions to prevent wasted time, as protocols will certainly be initiated by the DOA. Timing of the initial visit by the DOA, especially in instances of catastrophic losses, can sometime be delayed. To move forward until the inspectors arrive, our experience is logical protocols adapted with the insured, are usually appreciated by the food safety inspectors, as long as goods are left in place. Photographs are a good idea to support any actions taken.
Usually the initial step taken by the DOA, is to place a “REJECTED” tag on the place of business in a conspicuous location at the front of the business. This places a hold on all of the products, equipment, and areas used to produce the goods, until the DOA rep removes this status. Any resumption of operations at the site, requires a re-inspection of the equipment and facility, by the DOA. Any shortcomings found during the re-inspection, have to be addressed prior to receiving a passing grade required to resume manufacturing.
To obtain the best outcome, the salvor needs to relate their thought process on the necessary actions to be implemented, to the insured that is in direct contact with the representative of the DOA. This takes advantage of the pre-existing relationships in place, and removes any perceived prejudices.
In conjunction with the DOA rep, the separation of damages can begin. Obvious total loss goods usually involve all the open packaging, and in the event of a fire, all the items in proximity of the source. This would also include any food items with visible heat or soot damage, and items that may have lost refrigeration. Disposal of the total loss items is a very good first action. Open waste containers need to be ordered and set in place, and a schedule developed so the DOA rep can witness the destruction. Often the rep will put a colored dye or denaturing agent on the discarded materials, and will often follow the truck to the waste site.
The next action may involve the treatment of sealed stock in areas that do not fall into the aforementioned criteria. These products may be on hold under the DOA rejection of the site. The determination on the status of these goods often establishes the size of the contents loss. Obviously, nobody wants contaminated goods released into the consumer marketplace. If goods are determined to be potentially contaminated, the optimum place to contain their disposition is where they are situated in a storage facility, and prior to potential distribution into the retail world. The highly trained DOA rep can make these decisions based on learned criteria, and apply them to the product and packaging involved. The DOA rep will outline, if any, the acceptable treatment procedures to be implemented to save the products in question from destruction.
Following these guidelines recently led to a positive conclusion on a sizeable contents loss. The DOA approved the retention of the sealed products by the insured, thus allowing their buy-back. The effect was increasing the salvage sale, and placing the goods under a salvage title. This action produced immediate raw materials for the insured, reduced the loss of existing customer orders, allowed the insured to retain their employees, and minimized the BI period to no more than the time required to clean the facility and pass inspection. It was truly the best possible outcome for all involved.
If you would like more information regarding this subject, please contact Mr. Foster at 404.307.7332 or email him at chad@chadfosterandassociates.com.