It isn't that uncommon. I have worked for major companies which explicitly require that the extras are not taken for business rentals and that if they are, that the employee will be liable since the company had its own coverages in place. Where coverages were included in the rate, them that was obviously not an issue

If the company is clear that employees are not to purchase the extras, then it is hardly "chintzy" to not permit those to be claimed on expenses

In the OP's case, it seems that the rate was inclusive of the coverage and so should just reply back showing that it was an included item in the rate rather than additionally purchased. If a separate price is shown for the LDW, then would seem that the OP owes that amount to the company