How comfortable are you emotionally and financially taking care of the 500 dollars yourself? Are going to feel resentment for paying it yourself and/or can you afford to take on the additional 500 debt to your budget? I wouldn't put too much into how "they" are going to feel, you have to do what is best for you.
When I had my run in with a dog, I ended up paying the 250 that my insurance didn't cover. It didn't hurt my budget very much so I wasn't so stressed over it. The owners received a very hefty fine, had they not, I would have pursued payment for my medical bills.
Life is what we make it, always has been, always will be. ~Grandma Moses