Can a property insurance company give you nothing for 28,000 in damage?

I had my sister in law staying in my house, she trashed it! She tore the carpets, spray painted and broke windows, and a bunch of other nonsense. The insurance company won't pay for vandalism unless she personally says she did it with malicious intent(so stupid) of course she won't say that, she would go to jail! They won't even give us anything out of the $28,000 until they find her, good luck with that because I have been trying for over a month! USAA says that all she has to say is that we told her she was allowed to make holes in our walls, ceilings, and tear out our plumbing and electric and they won't give us anything. So basically they are going to take the side of the person who trashed my house over the person who pays their bills. They also said that the carpets look like she just spilled stuff on them and didn't clean it up so it's not covered, but there is marker, bleach and a bunch of other stuff all over every inch of them. They were brand new! Is this legal???

I should add that I was out of state, she asked if she could stay in my home while her husband was away. They also stole my toilet, shower, $5000 pool, lights, tiles, trim, baseboards, doors, and everything else possible that was in the house. She spraypainted the windows black and wrote her daughters name in lipstick all over the walls.

You allowed the person to stay with you - therefore it wasn't really vandalism, but a really crappy, mean spirited house guest. USAA is not going to take responsibility for your bad judgment -that is not what home insurance is for. Now if you could prove she was trespassing at the time and have her convicted of the damage then you have a case.
As far as the insurance company knows you DID give her permission or you had a huge party gone bad.

Sorry - wish I had better news for ya.

This is legal as long as the people in Washington (mainly Reps) are in the pockets of the insurance industry. How about those people that lost everything in Katrina? Same deal. It is our elected officials that don't come up with legislation to ban such practices. It's not like homeowners insurance is cheap.