Typically, when homeowners have an insurance claim, they only receive payment to repair or replace the property that was damaged. The fact that your adjuster has offered to replace the entire floor instead of just the area with visible damage is significant. You have to remember that claim adjusters have the difficult task of keeping both the insurance company and the policyholder happy.
Even though you just had new floors installed last year, it can be difficult to find the exact planks that were used previously. Neither you nor the Homeowner's Association would want the floors to be repaired with planks that do not match, so this could be part of the reason for approving payment to cover the entire floor.
Furthermore, because you have floating hardwood floors, it is possible for water to seep under the planks and spread along the sub-floor. If this happens, the additional water damage might not be noticeable until the contractor comes in and begins removing the floor. Instead of coming back later to approve payment for additional damage that was not visible at the initial inspection, it may have been easier for the adjuster to grant payment for the whole home.
Finally, the area of damage is noteworthy as well. For instance, if the water damaged area was in a hallway that connects to several rooms, it may be necessary to replace the flooring in those connecting rooms since a patch job could result in an unsightly or uneven transition. Most hardwood planks have tongue and groove edges that connect to each other. If the size of the planks used for the patch is not the same as the original planks, the difference will be both unattractive and possibly dangerous.
Since the claim is being paid out by your HOA's policy, you may not have any choice in how to use the payment. Ultimately, you will need to speak to someone at your homeowner's association to find out if you have any say in the matter. Depending on the contractor's ability to find matching floor planks and the area of damage, it is possible that the Homeowner's Association will agree with you.
If the condo association allows you to patch the damaged area instead of replacing the floors throughout the entire home, keep in mind that this could cause problems later on down the road. Insurance companies rarely approve payment to replace property more than once-- especially if repairs were not made the first time around. So if you have another water claim in the future, it could be denied when the insurance company finds out you did not replace all of the flooring with the payment from this claim.