Wisconsin – Contractor Broke Water Line In Basement, Now Insurance Only Offering $1k Toward $6k City Repair Bill

Location: Wisconsin

I’m a homeowner in Wisconsin. A basement waterproofing contractor was working inside my basement and used a jackhammer directly over a visible (4 feet away) water line where it enters the concrete floor. They broke the line, causing a city water main issue. The city required a full replacement of the line as it turned out to be a private service lead pipe, which cost about $6,000.

The contractor contacted their insurance, and the adjuster said the company would pay $1,000 as a “customer service gesture,” but not admit liability. They’re claiming the contract I signed makes me responsible for identifying any underground or under-concrete lines, and that this shifts liability away from them. They also argue that since it was a lead pipe, replacement counts as a “betterment” and they wouldn’t owe the full cost anyway.

However, the pipe was clearly visible where it entered the ground approximately 4 feet away in a direct line to the curb stop, and they used a jackhammer directly on top of it. The Diggers Hotline (811) was only contacted after the damage occurred which i have footage on my Ring Camera of them doing so.

The contractor’s insurance adjuster has suggested settling privately but hasn’t made a fair offer.

Questions:

Does that contract clause actually protect them if they acted negligently (jackhammering right over a visible water line)?

Are they correct that Diggers Hotline doesn’t apply to work done inside the house?

Should I accept their small offer or move forward with Wisconsin small claims court for the $6,000?

Any tips on how to present this kind of case in small claims effectively if I do file?