Ebay dilemma...HELP!

I`ve got an Ebay dilemma and I hope to get some sage advise from some others here. The abridged story goes like this:

I had a Dart GTS trunk panel for sale on Ebay, it was pretty thrashed but I figured that someone could use it so I put it up for auction worldwide. A Brazilian wins the bid but can`t follow through on the purchase, having trouble with his credit card. I offered it to the second highest bidder who bought it, he lives here in the states. I wrapped the ends w/cardboard, rolled it in soft Styrofoam, then backed it with hard Styrofoam, put it in a cardboard box, and shipped it via the USPS (his choice) without purchased insurance. He received it the other day and said it was totally destroyed. I`ve filed an insurance claim with the USPS but I doubt they`ll honor it since no insurance was purchased separately. I don`t know whether to just give this guy his money back or what. I feel terrible for him, yet I don`t want to lose all the money from the sale. Shouldn`t the P.O. have some obligation to deliver your package in the same way it was brought to them regardless of whether insurance was bought or not? I`m in a quandry and don`t know what to do. The P.O. says it`ll be at least two weeks before they can render a decision. Any suggestions would be welcome. On the lighter side, if you dont think Ebay`s a circus ,I just sold two items last week to B. Barnum and G. Bailey. :toothy10: