hi doufaceb;
given a neutral scenario, the buyer should be refunded. not like i haven't been there, done that a dozen times. while it isn't the seller's fault that the item got damaged (provided they packed it well), it certainly isn't the buyers. this is an issue between shipper and shipping company, and DEFINITELY file a claim with the shipping company. i hope it wasn't canada post with a fragile item such as glass/porcelain/ceramic...as they won't refund, insurance or not.
on the other hand, if you're a seller who clearly believes and states in your listing you will not refund for lost/damaged items, you have every right as a seller to have whatever terms you feel necessary. buyer should also be aware of this. however, if you do refuse, and buyer goes to paypal, they may win (apparantly, according to others, as its never happened to me before)...anyways...good luck...let us know what happens...
Kat