“I don’t think what the Insurance company does or does not do, establishes “color of law”.”
An insurance company has absolutely nothing to do with establishing color of law; it has no say in the matter. Color of law is determined by the facts and the law, neither of which an insurer can do anything about, but accept it.
That is exactly my understanding.
They took a look at this and said "not my problem", and I completely understand that. It really wasn't their problem.