I too expected to hear that they were rejecting the claim in it's entirety because water damage is a completely different policy.

It's his job to keep what his company pays out to you at a minimum. If it were me, I'd request all communication be done via email, for two reasons. 1) you have written documentation as to who said what when. 2) You have the opportunity to think things out before answering his questions.

As Sky mentioned, keep pictures and reciepts for everything. It may depend upon the laws in your state, but your landlord may be liable to cover the deductable. Even little things like additional travel to bring the kids to school, etc that you would not have had to spend had this never occurred.