It depends on if you paid the taxes or the insurance company did and whether you are itemizing your return or taking the standard deduction. You cannot take a deduction for any part of the taxes that your insurance company paid. You can only claim what you actually "wrote the check" for. For the amount you actually paid, if you are itemizing your return, then yes, you can include this as a deduction on your return. If you are taking the standard deduction, then no, you would not receive a deduction for your state and local taxes.
Itemized expenses include mortgage interest, state and local taxes up to $10,000, medical expenses in excess of 7.5% of your AGI and casualty and losses in excess of 10% of you AGI with the first $100 not counting towards the loss. The State and Local Tax deduction does max out at $10,000 regardless of your income. So if your total itemized deductions are less than your standard deduction, then you would not benefit from any of the sales tax the you paid on your return.
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