UPS is paying my claim

I have searched the threads for UPS claims, but have a new twist on the shipping damage question, if anyone could please help?

Lets say I shipped 2 boxes to a buyer purchased together for one price of say $500. Thanks to UPS only one of the boxes was damaged and its contents were destroyed.

Fortunately, however, I insured the damaged box (but not the other box) for the entire amount of the sale of both items - $500. (The item in the first box was fine.)

Understanding that there is a risk UPS wont pay the claim under the insurance, what is the most fair way to proceed:

* The buyer gets to keep the undamaged item 1, but still receives full amount of insurance funds, if and when they are recovered?

* The seller offers to refund the purchase price for both items thereby cancelling the sale, but the seller keeps the insurance proceeds and buyer agrees to return item 1?

* In the first scenario, it seems the buyer gets an unusually good deal, while the seller suffers a lot of aggravation

* In the second scenario, the seller receives full transaction price from the insurance claim, yet still has item one to use or resell.

Input from any lawyers or ethicists greatly appreciated.

Chalk one up for the good guys.. Congrats.

Chris

After the second set of speakers were dammaged by UPS I switched to FedEx. FedEx doesn't seem to destroy but they do occasionally route items to the wrong place. With FedEx the items do eventually get there in one piece. Also with fedEx I have filed twice for failed delivery and was refunded the ship charges because delivery was late.
Be persistent and don't let up, fill out all required paper work. Call customer service and check on status. Do everything you can think of to make sure they refund your money. No excuse for them not to pay out!