I don't do big weddings anymore but believe me this is just a ploy because the Bride did not hire one of the caterers "house" bands or recommended DJ's. They pay a big kickback to play there. Sometimes the kick can be 50% of what they charge.
I have a very good longtime friend who went very high up in Prudential and when I hit a similiar situation he told me its all BS, because the house is liable no matter what. Someone tries to sue you, your company will bounce it right back to the caterer. Your on their property.
I have used my homeowners umbrella policy for these occasions. 1 mil coverage for your home costs less than $200 a year. Even if you don't have an umbrella just give them your current homeowners # and carrier. No one is going to check.
Good luck and nice to hear that someone is still using live music for a wedding.

Bill in NJ