The actual part, they shouldn't cover. The fact that it roasted your car......they should cover.
In addition, who's to say a pothole you ran over the day before didn't cause the part to fail. A legal battle over this will be costly.....and I can't see how the insurance co could win.
Scam. Start sending letters to news agencies and see if they want to run a story. Bad press like this is something the insurance co will run from.