UPS terms say the item couriered is senders property until its in buyers hands. The right of ownership transfers when receiver signs for it. It doesn't matter what seller agreed with the buyer about transfer of ownership. With UPS only UPS terms matter.
So, if it was delivered damaged then the damage happened while it was still sellers property. The seller must make the claim and he receives the insurance money if UPS agrees the claim is valid.
So, seller must refund the money to the buyer as its not the buyers problem at all. Not refunding is inviting more trouble. And then deal with UPS.
Its was bad luck, nothing else. All courier companies are more or less bad and if you ship enough it will happen to you too.
I experienced the UPS terms myself when buying
expensive hifi -equipment from German lawyer selling deceased gentlemans estate. I paid through bank transfer (its not common to use Paypal etc. when dealing between companies). It arrived damaged and clearly dropped (box corner dented badly). The lawyer wasn't interested in dealing with UPS about this so in the end it was my loss.

UPS denied all my claims as it wasn't by their terms my property when it was broken. My company lawyers talked with UPS but it was clearly in their written terms which the seller had (unknowingly) accepted when he signed the UPS pickup. Lesson learned.