A part of me wishes you don't resolve this so you can out the presser here so others can avoid him/her.
However, even with the sketchy details from his end, it would probably behoove you to settle. You want 2021 slabbed prices, he is offering 2020 raw prices. I would compromise to some level that you could go out in the marketplace and just replace these books, even with a slight loss if need be.
I seriously doubt this guy has any insurance, and what insurance company would take a policy on this? What business policy would cover the liability of thousands of dollars of books with this type of business? It sounds like a smokescreen to give him some legitimacy. If you push him and even win in small claims, collecting is another matter entirely. Are you going to hire a lawyer and go to another state for small claims for a couple grand?
In the big picture here, you may have to settle for close to raw prices, if you're lucky. If you have a take a small L, move on. Lesson learned.