Damage to boundary wall but insurer claims that car had been sold and policy cancelled...

A friend of mine's boundary wall was hit by a vehicle so she contacted her household insurance to make a claim. They advised they would recover off the third party's insurers and got the insurance information from the motor insurance database. The third party company were contacted and after many months of correspondence and an admission of liability (as no reply from the insured) advised their insured has sold the vehicle prior to the incident but as the insurance was still in place the claim would be honoured but an assignment & agreement form would need to be signed by my friend for the money to be released. A month later the insurance company retracted their admission advising the car had been sold and policy cancelled - this leaves my friend with an increased premium & £50 out of pocket for the excess. What is most upsetting for her is they agreed to cover the costs then backed out. How can we prove they are lying about the policy was not cancelled? it obviously wasn't as this was checked earlier & the insurance database at the time confirmed they insured the vehicle. It might be worth mentioning that her insurers did carry out another insurance database search for the same date which stated no insurance record was found. If the policy wasn't cancelled, could they still claim off an insurer if the insured vehicle had been sold?