Insurance company problem (car)

I own a 1999 Saturn SC2 that has full coverage with Safe Auto Insurance Company. On February 4, 2008 I gave my fiance permission to drive the car to take the kids to school and run to the store for groceries. It was very foggy that morning and she was involved in an accident with another vehicle. My Saturn was totalled. I called Safe Auto to report the claim that day. Three days later I was informed by Safe Auto that they would not be covering my car. The reason given was that they assumed that Kimberly (my fiance) had lived in my home for 14 days, therefore she HAD to be either on my policy or excluded from it. I have never heard of such a thing. Kimberly's legal address is in Illinois and I live in Indiana. Safe Auto has now asked for Kimberly to prove her residence. She has a paycheck stub, issued by the State of Illinois, but they also want school information on her kids. We feel this is none of their business and don't want the kids or their information out. Are we required to give them this? The kids do live here with me and I have guardianship of them when Kimberly is in Illinois. Thank you.