Not being sure who "we" are, but thye are probably correct. You hire the room and if anything happens as a result of the building or the library's activities you woudl be covered under their insurance.
But their insurance won't cover your activities; so if you were to stack all the chairs into a high pile for example and ran aound them until they toppled on top of you all, the library's insurance would take no responsibility for your actions.
(An extreme example I know but demonstrates the point)