It doesn't matter what the seller's conditions are, or whether you insured it or not, they only apply when he has done everything right and you have received your item in good condition.
He did not do everything right, he did a lousy packing job assuming the case would be ok, poor assumption on his part. And your not insuring it does not absolve him of the responsibility of packing properly.
At least that's my opinion. I would notify Ebay and get their take on this, I bet they'll side with you and your request for a refund.
I once purchased a glass item on Ebay, I requested insurance. When I received the box I didn't open it because when I picked it up I could hear the shattered glass clinking around inside the box, AND the gal forgot to insure it. She reimbursed me all my money, including shipping, no problem.