Thus appears to be correct. Insurance only covers delays, interruptions, or cancellations due to listed reasons. A claim for unusable prepaid lodging would be a Trip Interruption or Cancellation claim, not Trip Delay. The list is on pages 41 - 43 of this document. The list of covered reasons is actually very short. It uses three pages because they explain exactly what qualifies. I see no provision for ATC failures.
https://www.chasebenefits.com/sapphirereserve2
Have you contacted the property to explain?
Waiting for the property manager to get in and they are supposed to call us soon.