You are responsible for the actions of your guests and any damage they may cause. That means if you weren’t insured, you’d have to pay all the bills out of your own pocket. The fact that you were insured is a blessing, the fact that your insurance didn’t cover all possibilities is unfortunate. If you feel your insurer is being unfair, take it up with them. Meanwhile, I’d be making a call to the idiot who left the tap on and asking what they plan to do about it.