Yes, it is possible that your car insurance company will not cover the fire damage to your car. Coverage for fire damage varies due to terms of your policy and guidelines that your auto insurance company uses.
Fire claims are typically investigated pretty thoroughly by auto insurance claims adjusters since there are a lot of guidelines that must be met for there to be coverage and there is a lot of fraud in general with fire claims.
Many car insurance policies exclude mechanical or electrical failures and breakages under their Comprehensive fire coverages. In general, unless the fire is a result of a covered situation, like an accident and then the fire broke out, etc., there is not going to be coverage with the car insurance carriers we represent.
If there is coverage for electrical fires under the Comprehensive portion of your car insurance policy, it would still depend upon the insurance adjuster determining how the fire began and if the actual cause is deemed to be covered by the specific terms of your policy. It may be that the actual electrical components that started the fire will not be covered but other damages caused by the smoke and fire to the vehicle will be.
If it is found that the electrical fire was caused by faulty work from a mechanic or stereo technician installing equipment, it may mean that instead of your Comprehensive coverage paying for your damages, you instead will need to be compensated by the responsible third party's insurance due to their negligence. If it turns that the cause was a flaw or defect in the design of your vehicle, then you may have to go after the car manufacturer, Mercedes in your case, for compensation.
Since your fire damage is already being investigated by your car insurance company, contact the adjuster working your claim to find out what is taking so long, and ask if there is a possibility that the claim will not be accepted.
If you are unhappy with your current auto insurance company, then shop around for better service and cheaper car insurance rates. Agents at CarInsurance.com can explain not only insurance terms and claim procedures but also explain how they can get you the best car insurance rates.