First insurance claim on my rental - what did I do wrong?

[Calvin Lin]

So I had a insurance claim on one of my rentals for the first time since I started purchasing rental properties 5 years ago.  There was a water leak and it damaged some dry walls, carpets and closets.  My property manager found a contractor who gave me a quote of around $7,200 to repair everything.  I called my insurance company and put it in touch with the contractor and somehow the insurance company agreed to pay the contractor $8,700 by the time they concluded the discussion.  The $8,700 included a couple of items that involved demolition and restoration of concrete slab that had a pipe buried between the walls that was initially suspected as the cause of the leak, to the amount of $500.  Turns out however the leak came from one of the toilets which had a leaked flange and that was undetected for a few days until it did the damage so no concrete work was required in the end.  The contractor asked me to still pay him the full amount regardless, which is the amount the insurance company paid me.

Since this is my first insurance claim and working with such a contractor, a couple of questions:

1) Did I err by putting the insurance company in touch with the contractor directly?  Should I have negotiated w/ the insurance company directly instead?  I don't want to make any money from this mishap but I am not sure if leaving that to them to discuss the cost was the correct way to go?

2) Should the contractor be paid the full agreed amount with the insurance company even though at the end some of the work items were not actually required?  The contractor said that fixing the leaked toilet flange (he actually replaced the entire toilet which was $118 and installed it) = concrete repair cost, which I thought was a bit steep and he actually thought I should pay him $118 extra to cover the toilet.  Would you have agreed to this?  I said no to the $118 and said that the $500 of not-performed concrete work should cover it and then some.