Being illegal does not make you at fault in an accident: "at fault" means what it sounds like--that it was your fault that the accident occured, because you were driving carelessly or negligently in some fashion. If your grandma was at fault in terms of how she drove, then she is not entitled to compensation for the accident. If you believe that the other woman was at fault but insurance is not paying, you can sue your own insurer for breach of contract--for not honoring their contractual (an insurance policy is a contract) obligation to pay; or you can sue the at-fault driver and the car's owner for causing the damage. In either event, you need to prove your grandma was not at fault but the other driver was.