We had an accident while towing someone else's car. Whose insurance pays for the damage?
We only have liability insurance on our truck. We were pulling someone else's car dolly and another person's car. We damaged the dolly and the car we were towing in the accident. Insurance said they would not pay for the other peoples' damage under our insurance. Whose company pays?
Whose company pays for the towing damage will be very specific to which insurer you have a policy with. Many companies will not cover any type of towing equipment without a special endorsement. Some impose limits on how much weight you're towing, as well. Your liability would apply had you gotten into the accident with the other car without any towing involved — and this is likely your insurer's reasoning in this case.
I suggest you try to settle this out-of-pocket by having the car's owner get an estimate, especially if there isn't extensive damage.
If you have any questions, don't hesitate to ask.