I too have a VacationGuard plan, and had it for this situation. Their family member definition is very broad, and does apply to your spouse (non-blood) relatives too - from the policy:
“Family Member” means the Insured’s, or Traveling Companion’s spouse, civil union partner, Domestic Partner, Child, daughter-in-law, son-in-law, brother, sister, mother, father, grandparent, step-grandparent, grandchild, step-grandchild, step-child, step-brother, step-sister, step-parent, parent-in-law, brother-in-law, sister-in-law, aunt, step-aunt, uncle, step-uncle, niece, nephew, legal guardian, foster Child, ward, or legal ward; spouse civil union partner or Domestic Partner of any of the above. Family Member also includes these relations to the Insured’s or Traveling Companion’s spouse civil union partner or Domestic Partner."
With illness, I found the key question is not "IF" there is coverage, but "WHEN" the sickness occurred. If you bought the plan AFTER your in-law was sick, every plan has a look-back period for pre-existing, as no carrier wants to cover something that has already occurred. So, that would be the first thing I'd review. Or, if you are like us, where we've been buying VG for years, it waives the pre-ex with renewals, helping me avoid this challenge of dealing with sickness that is inevitable, for me or family members.
Frankly, I'd just call them, for when I had issues, while I couldn't go into a whole claim scenario with them, nor did I expect them too, they were very helpful in explaining how it worked. What I also learned is that pre-ex applies differently to a cancellation, than to a family member you need to get to, who might need emergency care or pass while back home, yet you are away on your trip.
I am sorry you are experiencing this, as it's never easy. Frankly, there will be larger issues to navigate, yet perhaps this could be something that might help a little. Peace to you and your family ~