Get a good lawyer immediately.California hates landlords and loves poor tenants with personal problems.Yes,she can sue you and probably will win a settlement from you after driving you insane first.Doubt she can prove that air conditioning had anything to do with his condition but,California judges like to look for any excuse to favor tenants.Good luck to you.

Just don't give them any cash until they are out, have given you keys and sign a paper saying they are vacating and the terms of your "settlement."

A property manager would cost me $60-70k/year so for that cost I might as well hire my own local staff who can do the property management + other tasks outside of the typical property management scope (i.e. marketing for new properties, processing of new properties pre/post settlement, etc.).   

I'd tell them if they agree to sign a settlement letter, then I'd let the additional $300 they owed me go.  

She won settlement in December 2015, but due to all the medical bills and just bills in general she went in debt(ruined her credit which is why she wants to have the application under her son).

In CA, you're allowed to charge a reasonable hourly rate.It would be perfectly acceptable for you to write up a "settlement" agreement with her.  

If they are willing to accept that settlement then keep half.  

If a lawyer was involved, it should of been checked by the lawyer to see if there was one and accounted for in the closing settlement paperwork (usually just the sec dep, not the interest (unless your lawyer was better than average)). 

A SFR is way less risky than that.3) my REI who have around 1,000 units carry between $3M-$5M limits.  4) I personally insure 7,000-8,000 units , with the largest settlement to date being $50,000.Hope this helps reduce your fears of reduce your fears of owning some rental properties.

You could try to negotiate a settlement or a payment plan with the utility, if that would help with cash flow, otherwise you'll be the only one with a collection!