Take photos of the vehicles, ask the police to amend the report to at least add your niece's version and contact your insurance company to let them know what's going on.
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Contact the police and tell them your side of the story. Otherwise, turn it over to your insurance company and let them investigate and handle it. That's why you have insurance...
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First I would notify your insurance carrier because if these people are as bad as you think they are, then it is likely that they are going to make a claim or file suit. If you don't advise your insurance company then the company may lose time investigating these people, or worse potentially disclaim coverage because you didn't give them timely notice. Second, there are insurance fraud numbers for the state government that you can call and you should because this sounds like insurance fraud. Third, I would consider contacting the police that took the report and advising what you have posted. It is not clear whether you or anyone in your family were interviewed by them. Finally, I would determine whether the church has video surveillance of the parking lot or a maintenance person who worked while the car was in church parking lot and might be a witness, and if so, let your insurance company know that. They generally keep video for thirty days or less. If what you say is true, these people hurt all of us and they demean and threaten the judicial system, so take appropriate action working with your carrier and law enforcement.
The answer to this question is for general purposes only and does not establish an attorney-client relationship, and is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation.