Wow. I'm sorry to hear about this. That sucks.
DISCLAIMER: I'm in recruiting, I'm not a benefits specialist. I'll give you what my limited knowledge from the SPHR exam provided me.
Has she been on Short/Long-Term Disability during this time?
Unfortunately, the insurance company is going to do everything they can to stop paying claims and limit their liability. It also sounds like she cannot perform her job without reasonable accomodation. This may mean that she could be covered by the Americans with Disabilities Act:
I assume you have all documentation of when/how the incident happened and all information from every medical professional, doctor visit, correspondence with the employer, etc? If yes, I think it is worth at least consulting with an employment law attorney to determine what is the best course of action at this point. It sounds like she CAN still do the job--just not in the way she had been until recently. So it's possible a 'reasonable accomodation' could be performed without it triggering the 'undue hardship' clause under ADA.