Missing shipment

If USPS shows that the package was delivered then the seller is off the hook.

This is not true. The seller is only off the hook if he has the signature of the recipient. If the seller sent the package with no signature required, then he is foolish, and he is still on the hook.

It is on the seller to prove that the item was delivered. USPS has no skin in the game.

I always ship with a signature required, to protect myself, as the seller.

"BTW ,insurance covers for damage, not for a delivery that was shown being delivered!"

Check the USPS website. It states that the insurance is to protect against loss or damage. Also, with at least $200 insurance, a signature is required for delivery.

I never ship or agree to receive anything of value without insurance. It's a small price to pay for peace of mind.

Seriously, that's on the seller. If the seller had insured the item for the stated value a signature would be required. If the seller had spent a couple of bucks on signature confirmation there would have been no issue. There's also a geo-tracking option on the new scanners the USPS uses for delivery that in concert with Google Earth will show where delivery was effected.

Paypal will back you up. If there's no signature, delivery cannot be proven. The seller took the course of saving a few bucks. That's not on you. Have the seller file a claim for the $50 that Priority automatically includes and ask for a full refund while he pursues his claim. I handle this type of stuff all the time. I'm a Postmaster.

Where is the OP ?
And if the seller refuses to refund, what then?