[MRM]

That's not necessarily true. It takes a good coverage analysis to determine whether is its excluded. It's the insurers burden to prove an exclusion. Any ambiguity goes to the insured. It depends on how the policy is written and an outright exclusion is hard to enforce. Then there is the issue of whether the insured purchased a rider for otherwise excluded water damage, usually capped at $50,000. Then you have to look at the ensuing loss provision. You just don't know until you look at the actual policy language.

What company is the insurer? What is the cause of the loss? I can tell you a lot more if you answer these questions. But as for the original post, the carpet was toast as soon as it flooded and everything they've done since then have made matters worse.