Definitely worth challenging that decision, with the Financial Ombudsman if need be. The definition of Trip under the Policy Wording is:
a journey outside Your Country of Residence which must commence and end in Your Country of Residence, or a journey within Your Country of Residence which must include a flight, or at least one night of pre-booked accommodation away from home. Trip is extended to include any journey within Your Country of Residence for Car Rental Benefits (Section 1.5) only. Trips must not exceed 90 consecutive days with a maximum 240 days during each 12 month period. The Trip length will be extended to 365 consecutive days for Your Children under the age of 25 on a Gap Year.
It would be ridiculous to suggest that where you had booked a journey that would have qualified as a Trip, but did not end up leaving the country or staying in your pre-booked accommodation as a result of disruption, that this disqualifies it.