Certainly we hear reports of this from both buyers and sellers. Probably most of the reports are true.
The seller has contracted with the buyer to get the item to her safely, so a prompt refund is in order. Then the seller should be making an insurance claim to Canada Post.
If the seller was using LetterPost/LetterMail which is not insured, it is a Best Practice to add a few pennies to every Handling charge as self-insurance to cover occasional losses or reports of losses.
If the seller has doubts, he can ask for photos of the package. It is sometimes useful to mention that an insurance claim has been opened with Canada Post and asking that the buyer cooperate with the USPS postal inspectors in their investigation. This should not hold up the refund however.