"Flip or Flop" Season 1 Episode 2 Home Owners Insurance?

[Kevin Bird]

My wife and I were watching Flip or Flop on Netflix and on episode 2 [Spoiler] they buy a house that is vandalized when they buy it at a foreclosure auction.  So their insurance company gave them $15k for the damages.  Why would an insurance company pay them this kind of money when they bought the house without any sort of knowledge of what the inside looks like.  Any feedback on this would be awesome.  Mostly wondering if this is something that we could maybe use to our advantage when we start renovating houses.  Thanks again.