I had an outside faucet (sill cock) that developed a water l

I had an outside faucet (sill cock) that developed a water leak. It is located right outside the garage. The plumber replaced the faucet which would leak on this inside of the wall only when the faucet was turned on from outside. There were no visible signs of leaks except that the driveway immediately outside the garage sunk in the ground by about2 inches because of the leaking water below the slab. The adjuster is coming to look at this tomorrow but says it will most likely not be covered. Can you help explain to me if he is right?