Insurance Doesn't Insure Anything

Back in the day, I had a Ford Escort ZX2. Nothing fancy, nothing to gossip about, but it was a very fun little car. Five speed, power nothing, a couple of back seats, and the boring Ford Maroon color. Nothing spectacular.

Even still, I loved my little car. Then, one day, I got clipped by some girl who was too busy munching her McDonald's to see such a boring red car, and clipped my front fender. Nothing too bad, I thought, though what do I know?

Obviously her insurance company knows my car better than me. And what it costs to fix. And what my car is worth. As every insurance company does, of course.
My total estimate came back from the adjuster: This girl whacked my car for an astounding $2,900 in damages. I pondered for a moment at that, seeing how insurance companies always go with the lowest bidder when it comes to fixing the thing.

Okay, so a new hood, fender, headlight, and bumper, then paint it all to match. I'd be jolly with that, the wheel well covers were even in good shape. Of course local bodyshops (one being the "recommended" choice) simply scavange used parts and slap them on, then Maaco your car's paintjob. No way that'd be $2,900 in parts and labor. Maybe $1,500, if the body shop gives away a back massage with every fixed car.

But here's what got my mind in a bind. The unnamed insurance company stated they would total the car, cut me a check, and be on our way. Or, I could take a salvage title, fix it myself, and get a smaller check, and be on our way. The giggler is this: The first option would net me a check for $3,700. The second option would result in me getting $3,050 AND my car back.

I must have slept through business college during the class that taught common sense business practices. If you can spend either:
A: $2,900 to fix it, deal with customer for a bit.
B: $3,050 to get rid of the car and customer.
C: $3,700 to buy a "salvage" car, get rid of the customer.
Which option do you choose, as a business? I could have sworn most business strategies rely on making money, not losing money. Of course, since I was in a rush and didn't want to deal with any crap, I chose C, took the money, and ran.

In hindsight, I would have made more money if I had taken the salvage title, the check, and parted out the car on my own, but time was against me. It also allowed me to get a Mazda MX-5 Miata with the insurance money. Best plan ever.