That includes legal defense fees to be paid by their insurance carrier.

I don't see the need to do one right now unless the tenants are not moving and I need to start preparing for a legal defense. 

I ask where they've seen the bed bugs so I can come and inspect and they claim that such a question is proof that I knew of the bed bugs...After going around the world with this guy to explain that this is a normal troubleshooting step, identify where they've seen them so I can come and look, he claims he only responded with logic and that I'm wrong....Then he sends me another email telling me I'm being volatile and defensive...Then this beacon of logic asks me at 10:00 PM what time in the morning the exterminator will be by.

One idea I'm toying with right now is to ask the tenant to retain her own pest control services and to send me the bill if they find evidence of a rodent problem, but I'm not sure if that's legally defensible.  

I've been a property manager in AZ for a number of years and holding the security to cover the potential expenses for them not meeting the terms of the lease agreement is defensible here.

That includes legal defense costs.

I have kids, and they are my next line of defense for getting this done, I was just hoping that there was another solution...

She had absolutely no defense for not paying rent.

Revised Code of Washington - RCW 9A.52.090 Criminal trespass—Defenses.

I just looked at the disclosures on the last short sale I purchased and it says under Lender Agreement to Short Sale that "they (the lender) will generally require that the transaction be arm's length and that all terms of any benefit conferred on the seller be fully disclosed and that the seller cannot stay in the property following the sale".Here's some more reading on the subject if you're interested:Can I Lease The House Back to the Seller After I Buy a Short Sale?