He is suggesting I offer a cash settlement and be done etc At this point I think they are waiting to see how best to exploit the situation.

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.  

The court will also add your court fees to any settlement in your favor this way.If you end up doing this, and they want to settle, be sure to get the settlement recorded at the clerk's office properly.  

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.

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.

She then calls me back and says she has one year rent up front from a settlement she received.

I can't really see her going to court either but she's already offered us an out of court settlement if we just give her back her deposit.

Does the bond she paid go to you as part of the settlement if you win?

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!