If the Insurance companies do say they will go knock for knock - take it to the small claims court, a reasonable judge may find in your favour and you might get a result. The other driver might not even turn up in court and you would win then. You can then go back to the Insurance companies and...
Sounds like she had right of way - The insurance company will always say that. On what grounds is he saying it was her fault. I would report it to the police if he was on his phone - they can get the time of call if he was on the phone, if the photos show he had pulled out and not her driven in...