If the insurance company is doing its job right, this was priced into its rates.
Then it cost millions to a lot of people.
Which is understood by all those people when they purchase insurance. This isn't news. Spreading the risk around is why people buy insurance in the first place.
Then the failure wasn't free. This customer and all other customers paid for this failure. Other customers, who may have done more and more expensive work to avoid failure, are stuck paying for this failure. Insurance thus incentivizes a race to the bottom -- using other customers to finance ones own risk.