Please, please, please go and speak with a lawyer on the matter.  First, you need to understand form the attorney you are consulting with the ramifications of non permissive use and then you need to report the accident to your insurance company.  Now, understand that being licensed does not really matter when it comes to neglience.  In other words, if you are not licensed we say it is not an "indicia" of negligence, meaning that it does not automatically mean that you were the one that caused the accident.  The lawyer for the other side is trying to intimidate you.  Don't let him.  If the impact point and the facts as described by your daughter and the witness support that she was the one who was hit and did not necessarily cause the accident then her being un,icensed will not matter.  It will, however, have a tremendous impact on her permit and futire license and your insurance issues.  And your insurance company may still owe you a defense in the case but not indemnify you (pay out money) under your policy.  You should consider having an attorney that you pay out of pocket monitor them. Look, teens do really stupid things and I can surely undertstand how upset you are here but you need to step back and separate your parental anger (to which you are more than entitled) and look at the situation logically.  You seem to be doing that given your assessment of the damage and impact.  Now get an attorney on your side. Good luck.