Have a rookie question related to maintenance/incidents.

This incident has raised significant doubts about their integrity and business practices.

I know that my insurance would probably drop me if an incident occurred with one of their blacklist breeds.

I don't know for sure if your insurance will cover that but it would seem that loss of rent due to this incident could be considered an insured loss.If if you find legally that you are screwed, consider talking to your Mayor and city council. 

Setting aside the 1% incident of the 'pet disaster' scenario for a minute. 

Did your neighbor report the incident to the police?  

If the tenant makes it inhabitable, we will document the incident and charge them for the cost of repair/remedy.  

Coincidentally, it was a red eared slider and we later fostered him for a couple of years without incident. 

From my experience, I had several incidents were the tenants kept failing housekeeping inspections they just didn’t know how to clean so I provided information and instructions in a letter prior to the inspection and it worked...I hope this help..

Be sure to write an incident report while the details are fresh, including date and time, what the tenant stated, etc. and get photos of any "damage" from the downstairs neighbor.