When to talk to insurance agent about large unexpected expense?

[Rebecca E.]

We are new to REI. We have 7 doors and haven't had any big unforseen expenses until this week. This week we had a sewer problem with a lateral. It's not directly our problem but the city is going to make us replace the lateral because it's not up to code any longer. I'm simplifying, so don't get stuck on details. The costs are estimated at 5k. Our deductible is at 1k.

the question is: do we report it to the insurance and try to get them to cover it? Do we pay cash out of pocket so we don't have an increase in fees going forward? Is there a way to predict how much our insurance will go up after a claim? 

Any suggestions would be welcomed!