Legal Question in Insurance Law in Pennsylvania

I have a house that had water damage several months ago due to a water utility company's work for a highway project. I contacted the state highway department and they organized a meeting with the water company and the result was that we agreed via handshake that they would intall a french drain around three sides of the house and their insurance would pay for the inside damage to carpet, etc. in the basement. This is all documented in the state highway department's inspector's master diary. They never came to do the work and won't answer phone calls. My question is this. Their insurance company did indeed send me an estimate of $2600 for the interior damage a long time ago and said I needed to sign a release form releasing their client from any further liability and they will immeidiately cut me a check for this amount. I told them I cannot since they did not do the agreed upon work around the foundation which I estimate will cost me $3500 to $4000 to have done. It needs done now that they created voids for more water to come in and they agreed to do it. The insurance company's documnets say I have a year to decide whether or not to take the deal. I know I can sue and win in court especially with the state goverment's own documentation but would it be worth waiting all that time and then probably giving up most of the extra money for attorney fees. Should I just take the loss and grab the $2600 now or could I take this money and still sue given the fact that this could be unfare business practice on behalf of the insurance company by getting me to accept less than half of what was agreed upon.

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