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My Insurance accepted fraudulent claims (Glendale, CA)

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I have an atypical question:

This New Year's Eve I rented a car and used my own insurance b/c the rental co. didn't offer any liability...

I brought the car back in the same condition. The owner went into the lot to examine a vehicle for a diff customer. When he came back 15 minutes later to finally 'help' me, lo and behold he indicates that I've made a fresh scratch. He pointed this damage out to me & my mom... said we'd work it out - meanwhile I was screaming that there was no way I made that scratch.

I was the one who reported it to my insurance b/c I knew this guy was full of crap ...He ended up claiming FOUR totally bogus damages. He also lied & said I refused to sign a paper indicating any new damage (my mom is a witness - he NEVER asked me to sign anything...he examined the car thoroughly and only pointed out ONE damage).

My insurance co. settled w/ the jerk. Interestingly, they never asked for my mom's statement...

Anyways, they accepted three of the four damages and they charged ME two deductibles.

This guy was obviously a blatant liar. According to officials @ City Hall, his questionable business practices over the years have been referred to the City Attorney - unfortunately, they can't nail him down because he keeps moving around.

I will probably concede to the one scratch he showed me & my mom b/c I can't prove I didn't make it.

I complained to the Dept of Insurance and am still waiting to hear back ... if their decision is unfavorable, should I just pay the guy or let him take me to Small Claims? I'm pretty sure I can damage his credibility (due to other things I won't discuss here) but - should I even bother fighting anymore when my insurance company said they had to accept his claims "in good faith"?

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