Auto Insurance Claims : Insurance fraud?

My wife had an accident earlier this year. She was exiting through the exit in which the gate is broken, so it is always open. As she was coming out there was a truck blocking her view as the truck was almost in front of her. Behind that truck was a big Houston Metro bus, blocking even more the view. Well my wife... show more My wife had an accident earlier this year. She was exiting through the exit in which the gate is broken, so it is always open. As she was coming out there was a truck blocking her view as the truck was almost in front of her. Behind that truck was a big Houston Metro bus, blocking even more the view. Well my wife felt compelled to go because she felt "in the way"..She drove Very carefully before proceeding to make the left turn when all of a sudden, a car hit her on the side (t-boned her).
The other car suffer minimal damage to the front, and would still turn on and drive. My wife's car had the whole driver side beaten up and the right front tire was pushed inside and we could not push the car. The other girl was most likely speeding due to the tremendous impact and damage that my wife's car sustained.
Okay, so both parties had no insurance. So we came to an agreement that my father in law would pay for the damages (because he thought his daughter was at fault) but these body shop repairs were to be at a place of our choosing.
The lady's mother came to the scene and made the agreement by making my in-law sign a piece of paper (not notarized). Okay so the following week she is bitching that her daughter needs the car to go to work and school. Hello, so does my wife! And I had to take my wife to the hospital because the following day she was feeling bad. Anyway. The other lady took the car out of the shop and choose to do her own thing.
And then she was saying her car was un-repairable, or that it would cost $900 to fix?! When her car sustain only minimal front damage. Can you believe that?! My wife's car cost $700 to fix, but only the mechanical...the body shop damage will run in the 1,000+
The lady's daughter had 2 kids in the backseat when the accident happened. They were playing fine, jumping and climbing (we were with them for a few hours)...and the following days we get a call from this lady saying her grandson's arm might be broken?! Don;t you think a lil 5-7 year old boy would be screaming in pain if his arm was broken?
Now she filed an insurance claim and the insurance company is wanting to talk to us about the claim. The thing is, the lady got car insurance AFTER the car wreck. And besides not wanting to get the cops involved at first, I also do not want to go along with this fraud because I have no idea what she is trying to do. She has called and told my in law that her lawyer wants to talk to us. I don't know if this is true or just trying to threaten us....


What could be some of the possible consequences? Is she bluffing? Could the cops get involved, could she take us to court even though it was her daughter who hit my wife?


btw: this happened in Tx. and I did get photographs of the accident recording the damages to both cars.
Update: skydan - no her dad would not pay for her insurance. It is only in the case of an emergency that he was willing to help. We were getting ripped off by the insurance company and it just seemed easy to stop paying for it. The way I see it, you get insurance to cover you in case of an accident. You don't get... show more skydan - no her dad would not pay for her insurance. It is only in the case of an emergency that he was willing to help. We were getting ripped off by the insurance company and it just seemed easy to stop paying for it.

The way I see it, you get insurance to cover you in case of an accident. You don't get in a car wreck with no insurance, then go get insurance and expect them to cover the costs. At the time of the accident the cars were not insured, so why would the insurance agency put up with the costs?
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