Ask to see the child’s arm (with the bite marks) or a photo of the bite (with a date) and ask to see a Dr. report and bill. If this is worth a lawsuit surely they have LOTS OF EVIDENCE. If arm is only pink (no skin broken) you need to be sure is it even the RIGHT arm or location on the arm that you know was grabbed. If the dog grabbed the jacket it is possible to have bitten the arm but most likely NOT w/o putting a hole in it so yes, you owe for the jacket, if that happened in addition to Dr. bills.
WHY (exactly does the person feel they need to SUE YOU to get recompense, if they have pictures & medical proof of the bite, versus just providing them? Have they called Animal Control to report the bite? Have they asked to see PROOF your dog is up to date on rabies – I WOULD do both, if it were ME who had been bitten.Ask to speak to the adult who brought the child over and ask, if the child had been hurt why the child did not cry or say something (at the time) or why this person did not report the bite (surely she looked, if she saw the commotion) or surely the child mentioned it in the car. While the child may have been scratched, I bet there are no BITE marks or holes in the arm, or I think the child would have spoken up or cried. It is also possible the child could have slipped & scrapped the arm, etc (but probably in a different location) so be sure the “STORY” checks out.IMO (you are at fault, *if* the child was bitten.) You admit you KNOW you have a wildly enthusiastic dog with little to NO formal training – who DOES BITE or as you call it, “NIBBLE” people. That MISBEHAVIOR should have stopped 5-6 MONTHS AGO and you should have BROUGHT IN A TRAINER, if you could not manage it. It is NEVER okay for a dog to put teeth in skin past the puppy phase of 4-5 months of age. Yo now have an adult-size GSD with ZERO manners and no BITE INHIBITION, who is certainly like a “elephant in a china shop” if not more like… a loaded gun, since in jumping ON people, he can also push somebody over, or cause them to stumble & fall & break……. an arm, wrist or leg.Your other options were and are: NO VISITORS to the house (if the dog is there) or NO DOG on the premises – when people arrive. If the dog have been crated or behind a closed dog and/or on another floor – none of this should EVER have happened. But I will bet the dog was loose or only on a leash, or somewhere it could still easily…. GET to the child.