"Even though the engine broke a crank and his
medical condition, or lack thereof, had no bearing on the cause of the
loss, the GII pilot still took a 100k hit. AVEMCO was the company if I
recall correctly."

I sat in on a forum at Arlington given by an Avemco representative on the topic of claims denial.  A few of the key points I took away from the session were:
1.  A very, very small number of claims are ever denied.
2.  Most denials are the results of fraudulent insurance applications or claim submissions.
3.  Breaking a FAR does not automatically lead to a denial unless the FAR violation was the direct cause of the accident.
Examples of #2 above would be insurance being purchased after the damage had already occurred.  Falsifying and application can also be claiming to have current Annual, BFR or Medical when the coverage is acquired or renewed.  Letting any three of these lapse during the following year is not cause for automatic claim denial, but stating that they are current on an application when they are not is considered fraud and is a big deal.
It was a very informative forum.

Chris Zavatson
N91CZ
360 std