Most polices have clauses which give the insurer the right to handle claims against you however they see fit. It's so that they can settle cases that are in the grey on a "costs benfit" basis. This means that they can settle a claim against you rather than incur massive costs defending a case that could go either way.
However. Just because she has made a claim against you and your insurer has settled it does not mean that you cannot make a claim against her. You have legal cover insurance so get the details from your insurer and go from there. Without a doubt you will get something from her insurers unless there's something you haven't told us (you weren't on the back wheel or anything were you?!!)
You might also want to consider complaining using your insurers formal complaints procedure. They have a statutory duty to "treat customers fairly". If that does not yield a positive response then complain to the FOS
http://www.financial-ombudsman.org.uk/. It will not cost you anything.
Let us know how you get on. This kind of thing gets my blood boiling!