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Not held liable for lost packages?


I have a question for you all. Would you order from a company that has this in their Policy?
With the holiday season upon us, I am concerned that my packages will get stolen. With a policy listed like this on a website, who will be held liable?

I have a friend who order from this company back in July. He received an Order Confirmation and states that his order will ship out around Mid-August. It is now November, and he still has not received his package. He opened up a case with Paypal, and the company responded back with the tracking information (which he had never received). The tracking information did indeed state it was delivered by UPS. 

Paypal closed the case because the seller provided this information. He reopened the case to dispute because he wanted to explain more in detail and the fact that he didn't get any emails from this company. Paypal still refused to refund the money. 

He contacted the company, Zen Monkey Studios, and they responded back with the screenshot above. Do we always check the policies when we order from a website? Or is this a new thing now because the Holiday season is upon us. If he were to go to UPS to inform them of the lost package, what can they do? Zen Monkey still won't refund him his money.

My friend is not happy. Of course. I wouldn't be as well. $55 lost. No package. Paypal sucks. And this company is scamming people. Nothing annoys me more when companies like this exist. I just wanted to let my readers know about it.
Please share your opinions with me. Has this happened to you before? What would you do?