The largest insurance claim I've had was for a little over $5k for a vehicle repair after collision while avoiding a pedestrian in the street. I'm not sure if you think that's "large" but it was very painless to do IMO.
Source: been through insurance claim on a business that burnt to the ground with months of finished product stock (and which our accountant had accidentally under-insured. Very painful!)
A friend had an Aston Martin that caught on fire. About a $120k car. It took months of investigations to close that claim. Insurance pointed finger at AM, AM wanted their own investigator, fire inspector involved, etc.
And that’s not even large relative to a house or business.
This car burst into flames overnight while parked. Turns out it was an electrical short in the dashboard wiring. But, cars don't often self-immolate, so the suspicion of wrong-doing caused a delay.
I also don't know if they paid before the investigation was completely closed. They may have, but even at that, it was a few weeks.
It's way worse for a business, when I went to the MDRS for a week the bistro's kitchen in our Flagship restaurant went up in flames. The cause was unknown, but all in we lost 4.5 weeks of work due to unnecessary down time, not including the equipment repairs, contractor labor and misc costs because the city's investigators wouldn't come out to assess the damage in the allotted time slot to investigate and approve the repairs because of snow (IT'S COLORADO!) and then the Insurance stonewalled and tried to delay things further by not playing nice with the city that delayed reopening.
All told I wouldn't be surprised if we lost over a couple 100ks in lost profits and limited operational costs (we still had the bar/grill upstairs) and having to rebuild the Kitchen plus labor. Corporate paid us bonuses, which were really just 1/3 of our normal pay to help offset expenses, because of limited hours.
Bourdain was right: restaurants really are horrible businesses. Insurance which is mandatory, compounded with local government regulations and approval, makes it way worse.
I can't imagine that response passing muster in court, because as another commenter pointed out, all damage would involve some kind of collision between two objects which means that if we accept their response then the policy would be worthless because it wouldn't be able to cover anything.
It's implied (in the context of motor vehicle insurance) that "collision" in their case means collision between two vehicles but they're now trying to be pedantic about it when it's in their favor.