If my car was hit by a stolen vehicle, can the the owner's insurance company refuse to cover the damages? 

You may not have any real options. There is no liability for the car's owner when the damage is caused by unauthorized use, particularly when a car is stolen--consider how unfair it would be to hold someone accountable for the damage done by a car thief. And liability insurance only pays when there would be liability. If you had collision, your own insurance would have to pay--collision pays regardless of who caused the accident or how, which the main reason to carry it.

You could certainly sue the car thief, but odds are, he or she has no money. If you believe (and believe you can prove) that either the owner was in collusion with the thief (e.g. had the car stolen for an insurance scam) or was somehow unreasonably negligent in allowing his car to be stolen (e.g. allowed it be borrowed by someone he knows steals cars), you might be able to attach liability to the owner on that basis; however, short of that, you probably do not have any recourse.