Get a lawyer.
Unless you think you're at fault and should pay, you probably need legal advice from your attorney.
If the attorney fees are too high, you could try to settle out of court.
But, if the customer is taking you to court, you are going to have to go eventually unless you resolve it out of court. So, speaking to your attorney may be a good idea no matter what. You need someone with some legal expertise who can really look at your case, and give you the best options.
As far as the BBB complaint, you can also contact the BBB and let them know that the complaint comes during a suit, and you would like to be able to address their complaint on record(if your attorney advises you to do so).
I'm not sure about your case, I think your insurance company is strectching a bit. But that's only my opinion. I say it's a stretch because only 1 in 10000 oysters produces a pearl in the wild. Therefore, it's no more an expectation for the oyster to have a pearl than it is for it to have a stone in it.
Let us know how it turns out. It sounds like an interesting case.