Q1) "I have never received it because the seller said that Fedex lost it.He says he had it insured for 2500, but Fedex says they dont insure any jewelry over 500."
A1) And what does the shipper say when you ask him to FAX you copies of all Fedex paperwork???
Q2) "Is the seller liable for my money back?"
A2) Maybe. Depends on whether he can prove that that it was delivered to Fedex and insured.
Q3) "How do I sue him?"
A3) Ah, the fun of doing internet (interstate) commerce. You have to sue him in California or in federal court.
Q4) "He is in Ca. will I have to go there?"
A4) See A3.
Q5) "Can I recover costs for travel,lawyer,and time off of work?"
A5) Depending on your claim, you might be able to recover attorney fees, but probably NOT for travel and certainly not for time off.
Suggestions/Comments:
1) Have you filed a fraud claim with eBay???
2) Why didn't you use escrow for this large a purchase?
3) Have you contacted his local police department about filing fraud or theft complaint??