I think the issue here is Musk has been self-insuring, which he can, but he is trying to limit his liability by creating doubt so there is a settlement. Not only did the explosion destroy his rocket, but also damage the launch pad area, possibly another few billion in losses.
He simply doesn't want to have to write a check to NASA for a billion dollars so he is creating some doubt and hoping, instead of litigating it, they settle for half or less.