Agreed. BS if covered.Yeah, that's total bull poop. I would be throwing that poop right back at them. Raise a stink, I don't think they can deny a theft claim as long as you've got theft on your policy.
Or if they try to write you a check for the car as a total loss (allegedly costs too much to repair), you will NOT be able to find a same-car replacement for the same price (within 30 days), so they have to keep upping the payout until you can. I wouldn't want to play that game though, unless they force it on you.