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I do not see the relevance of you already being on holiday when you took out the policy.
If your wife suffered from a pre- existing condition that was not disclosed to the insurer then I can understand their view should a subsequent claim be made in respect of that condition.
However, this cannot possibly apply to a broken leg.
I would give point this out and give them another opportunity to accept the claim failing which you can complain about them to the Financial Ombudsman Service. You can make the complaint online.
If there are any further points kindly reply I will be happy to respond.
Otherwise please either accept or rate my answer on the system so I get credit for my time.