My first question is did both drivers had automobile insurance? If so what kind? My next question is, who received a ticket? My last question is which insurance adjust is your sister dealing with...someone from her insurance company or someone from the other driver's?
The answers to those questions make a big differece. I'll explain what I know and it may help you help her with this. Keep in mind, I am in DE not TX.
1. Going on the assumption that both had liability insurance - Who ever was at fault (or received the ticket/deemed at fault by the police)...their insurance would pay for the other driver's (the not at fault driver) vehicle and medical bills. Their own vehicle would not be covered but medical bills should be (I think).
2. Going on the assumption that both had compensative insurance (typically required if they are still paying off a car loan for that vehicle) - Their own insurance would cover their car only.
3. Going on the assumption that they had both liability and compensative...both cars would be covered regardless of who was at fault. If there is question as to who is at fault, they would each deal w/ their own insurance companies to get their cars and/or medical bills paid. Then the insurance companies would have to battle it out.
Since the other driver doesn't remember, they have to go with what the scene, the police, the witnesses, and your sister can tell them. Based on the scene and witnesses, the police make a determination as to what happened (write a report and usually a ticket) so unless that contradicts what your sister is saying the other driver should have gotten a ticket/been at fault. Most insurance companies try to put at least some of the blame on the other driver too because it lessens their liability (most of the time, the "not at fault" driver could have done something different to have avoided the accident...stayed stopped longer, slowed down, swerved, something so the insurance companies do try to minimize their liability). Going on the assumption that your sister was not at fault, I would have her file the claim w/ the other insurance company (assuming there is one) and simply notify her insurance company (if I were her I would make that call first). What happens next depends on who was deemed at fault and what type of insurance each had. If there isn't another insurance company then your sister needs to file the claim w/ her insurance company.
Since she has already talked to an adjuster (again, which adjuster was it), she first needs to find out on what grounds it was denied. Even if she is filing w/ the other insurance, her agent should be able to help guide her through this.
**Just read your SWH. She definately has to file with the other driver's insurance. At this point, she needs to find out more details about the denial of the claim and go from there. Sounds like she may also need to get a copy of the police report and maybe talk to the officer.