As others have mentioned before, paypal is doing this because of rampant credit card charge back issues. Here's another scenario, where after losing the cases, Paypal still decided to refund the seller the original cost of the item:
Link. Therefore, if the Post Office (or other shipper) never updates the tracking as package delivered, you are truly screwed. I've received assistance from Paypal on chargeback issues, and I personally think that Paypal is losing loads of money on this, which was why they made this change. I think credit cards really need to crack down on the fraud happening here. I think the intent for the chargeback was if someone stole your credit card (or credit card number), and not like what is happening here.