Your daughter did not participate in the fraud, and she does not have first hand knowledge regarding it. If she is questioned, she should not lie, but she has not obligation to come forward when there is only speculation as to the activities of the car owner.
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Your daughter committed possibly a couple of criminal violations. If she damaged property and failed to stop, then she could be filed on for failure to stop and give information. This includes a tree, mailbox, etc. that may have been involved. If the tree was on a person's property, then she had a duty to inform the homeowner of the incident. The police did not have to be called.
Your daughter also committed an offense of driving without a driver's license. If DPS was aware of this, your daughter could not get her driving license until she was at least 18 (and maybe 21. I am unsure.)
I do not know why the mother lied to the police as they did not have to be notified unless there was damage to a person's property which was required to be reported.
However, as long as your daughter does not provide false information if contacted by the insurance company, then she has not committed fraud. However, most times, insurance companies want to talk to all witnesses which would include your daughter (if the other two reported that she was in the car), and they might even go to the scene (and possibly discover the neighbor witness.)
Your situation is both a legal and ethical dilema, and may affect the future of your child. I would consult with a local lawyer because if my concern (as a criminal lawyer) that there is damage at the property. After receive the advice about the criminal situation, I would then consider what would be the best thing for your daughter and her future. (THAT is not legal advice in any manner as I hope is clear.)
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