Legal Question in Criminal Law in California

I have a "hit-and-run" charge filed against me with an upcoming court appearance. The supposed incident is a claim that I backed into someone's parked car and drove away. The person initially contacted me by phone and I returned to the scene to investigate their claim. When I arrived the man was gone but his wife was there and showed me the supposed damage. The car was indeed damaged, but considering my speed and trajectory it would have been impossible for my vehicle to have caused it. That, and I would have felt the impact. My first thought was that this might be a scam to get my insurance to pay for prior-damages caused by someone else. I was however ready to exchange information, but the woman said she didn't have the key to the car to get the papers. She suggested I return the following day when her husband would be home. I agreed and left. A couple of hours later the husband called me (in an angry tone) saying that he was home and there is a police officer there with him, and that I had better come exchange insurance info or he would file hit-and-run charges. I told him I was on my way, but when I got there the officer was gone and the charges were filed. Suffice to say, i didn't give him my insurance info, but went straight to the police station to talk to the officer. The officer said that the report was written and filed and that I would have to take it up with the judge during my court appearance. I contacted my insurance company to get some advice, but they were of no help. Then, somehow the other party got my insurance info (perhaps from the police) and filed a claim. I send photos of their car as well as mine to my insurance company so they could investigate. My insurance company looked at the photo of the damage on their car and along with their story decided that I was at fault and they are willing to pay for the damage. (No real investigation took place). My insurance company is pressuring me to accept the claim, and tells me it will not effect my premium. However, I am not at fault and no actual accident ever took place. I don't care if the insurance wants to pay for it... What I am concerned about is that I have a "hit-and-run" charge to dispute, and I feel that accepting the claim is accepting guilt. So I feel I should deny the claim and just go to court and plead not guilty. I will have to get a public defender because I don't have money for a lawyer. I feel that the burden of proof is on the other party, and they have no evidence apart from what appears to me to be previous damage and their own word. But it freaks me out that there's even the slightest possibility I could face jail time for a crime I didn't commit. I just want to know if this is the best way to go about handling the situation and if anyone has any additional advice. I really appreciate all the help I can get with this.

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