I would be asking them to prove the tank burst due to it being faulty.
Our original insurance covered tank replacement but they would only pay for the drying of carpets if the damage had been done by "normal" water supply (eg burst pipe or water cylinder). We now have what they call "Premium Cover" which will replace tank and pay for damage caused (ie carpet replacement or drying).
Apart from that original policy (which was our own fault as we had not worded our questions correctly when we asked if it covered the fish tank - it did, just not the damage caused by a tank breaking) we have not had any trouble with our insurance. In fact, when I wrote off the 4WD while we were on a rally (some of you will remember that!), the cheque for a replacement vehicle was waiting for us when we got home a week later! 8)