Dallas had a substantial hail storm in May 2012. (My truck was damaged by baseball-sized hail.) If the rental car company did not quickly complain about damage after you brought back the car, it will be difficult for the company to prove that the damage was your responsibility. Most likely, the company re-rented the car after you returned it.
You should write the company a letter to address the claim, and point out that hail had not happened in April, and include evidence of hail in May, and advise the company that you will vigorously resist and defend the claim. If the company persists, notify your insurance company who may have coverage for the claim.
For $700, it is not too likely that the company will sue you.
I have had the same experience myself. The way I handled it was to promptly write a polite but firm responsive letter to the rent car company flatly denying the "facts" they were relying on, stating that I had returned the car in the same condition in which I had received it, and informing them that I would not honor their claim and would not pay them anything. As best I recall, I never heard from them again.