@tobixen, Here in Canada I ahve yet to run acrossa company that would not cover the damages. Not sure what you got for isurance but I would insist they cover everything. Do not low ball unless they say it is not covered. The point of insurance is for something like this. We had a dishwasher one time that had a leak and ruined the kitchen floor and the insurance company completely covered all expenses including labour. Good luck.
We do have some different policies, most of them only covers "sudden unexpected events", meaning that damages that has accumulated over time due to leakages, fungus, animals or other pests won't be covered.
I don't think it's reasonable to expect the insurance company to cover the replacement of a nearly 70 years old sewage pipe with expected lifetime 40 years. At the other hand, I'm pretty sure damages caused by a sewage overflow should be covered.