[Eldorado]

as the shipper, you will have to initiate the insurance claim. I would ask your shipper who would get the claim, the shipper or the reciever...

if the reciever gets the claim, your job is done...
if you get the claim, what I would do in your spot is send the guy his money back and wait for the post office to reimburse you...

ask the buyer what will make him happy.. present his options, and let him choose...