SteveD has been through this particular task recently, maybe he can offer some advice ?
Personally, I'd be looking around locally to find a bike of similar setup/condition and asking the last person to service it for a statement on it's condition. Then you have your valuation.
I'd take the line that I insured to replace the bike, and so that would be my minimum acceptance. I'd also give them a time frame to come to a solution before I went off to the solicitors, and I'd tell them in writting what I would do. Pretty much I'd take a hard, none deviating line with them and leave them in no doubt that I was serious.
Remember though, above all, be nice to them, but firm!
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