Sellers CAN be held liable in both cases IF your item is packaged improperly. As a matter of fact, postal insurance WILL NOT COVER anything damaged due to improper packaging.
And it doesn't take much for an item to be improperly packaged. Some sellers are just lazy and cheap and will just throw an item in a box without much (if any) packing materials. So, the item arrives with damage it didn't have when it left the seller's hands. But you think "oh, I bought insurance, I'll be fine". No, I'm sorry but you won't be. Unless the seller refunds your money.
EXAMPLE: Buyer wins expensive designer handbag and pays $20 S&H for a "flat rate service". Seller then puts a $750 handbag in a padded envelope and mails it Parcel Post for only a few dollars. Insurance is purchased...but the bag arrives damaged from having packages piled on top of the very soft leather. Who's fault is this? THE SELLER. You might as well just save your time and energy in filing an insurance claim as it will be denied.
In order to file a postal insurance claim you have to bring the damaged item and all packaging to the post office. As soon as they see that the handbag was put in an envelope, YOUR CLAIM WILL BE DENIED. This is not considered sufficient packaging for this particular item. And even if your claim is paid, it is a LONG process that can take MONTHS.
And remember that only the PRICE PAID for the item will be refunded. Not the retail price or the current value. ONLY THE PRICE PAID and that DOES NOT include postage and handling. So, if you win an item for 1 cent and you pay $50 S&H, you will only get back ONE penny. So think about this when bidding on low priced items with inflated S&H.
FRAGILE (delicate or breakable) items have to be CAREFULLY packaged. The items have to be PACKAGED PROPERLY in order to arrive safely for the claim to be paid if there is damage. This means plenty of bubble wrap, popcorn, air cushions, etc., and a nice sturdy box.
How can you know how your item will be shipped? Just ask the seller. Many times people "assume" that a seller will know how to properly package a fragile item and this is quite often not the case.
EXAMPLE: A friend of mine bought an antique porcelain teapot from England and paid over $800 for it. The teapot arrived in hundreds of pieces because the seller just wrapped it in a couple of sheets of newspaper and put it in a box and sent it overseas. And my friend was out the $800 because the post office would obviously not honor the claim as it was seller packaging error and the seller refused a refund saying, you guessed it, "I'm not responsible for damage by the postal service".
So, when buying an item of value that could end up damaged in transit it would be very wise to ask the shipping method and also how the item will be packaged.
NOTE: Never, EVER, have a fragile item sent Parcel Post. This stuff gets thrown around like bales of hay. As with the expensive handbag...although the item is not FRAGILE, it can definitely be damaged from being tossed around in a box across the country without adequate packaging. And never consider having anything sent Media Mail that is remotely fragile. The reason this method is so cheap is because there is no worry about claims as the item should be able to withstand just about anything as it should be something on the order of a book or heavily cased CD. Media Mail gets the worst treatment, Parcel Post is second.
SELLERS are not