The insurance companies have a point. There is a difference between a flood and a storm surge.
The real issue is what the insurance companies meant BEFORE the storm hit when they sold flood insurance. If they can prove that they did not include "storm surge" as flooding, then they shouldn't have to pay.
That gets us to "hurrican coverage." If they sold hurrican coverage and specifically exempted "storm surge" from THAT, then they should not have to cover it.
Do they offer "storm surge" insurance? I'd say that NOT selling such coverage would indicate they had not considered it separate from either hurricane or flood insurance.
Generally one assumes a flood is caused by an over-accumulation of rain mixed with gravity. In this case the damage was caused by an over-accumulation of wind which overcame the forces of gravity and as such it is not technically "flood" damage, but is wind damage.
It's kinda like taking out a tornado policy and then a tornado comes to your town and picks up a neighbor's car and deposits it on top of your otherwise un-damaged-by-the-wind home and then the insurance company refuses to pay for the damage caused to your home because the policy did not cover damage caused by automobiles.
Of course storm surge is flooding. If not, the coast wouldn't be listed as a "flood zone", because it certainly isn't going to be inundated by rising waters from the river.