Marathon Gas Station Sold Watered Down Gas

About a month ago my fiancé stopped and got at a marathon station not far from our house. After fueling he noticed that when he started the vehicle it was acting really weird & eventually is just stalled out. He noticed that 3 other vehicles had would not start after getting gas. Long story short after the store owner was notified he told us to bring in an estimate on how much it would cost to fix our vehicle because there was water in the pumps. Well we did just that & the total was expected to be around $1400. Now the owner is refusing to pay stating that he would either give us $400-$500 or he could pick up our vehicle and take it to his mechanic but he couldn’t tell us the name of the shop, just stating it was someone named “manny”. He said that $1400 was way too much & their insurance refused it even though they told me himself the insurance was not covering anything (I’m assuming because they found the owner at fault.) I also mentioned to him that I knew he wrote my neighbor a check for $1300 for the damages it did to her vehicle but he stated they never paid anyone out that much. We have been without a vehicle for almost a month now because we cannot afford to get it fixed. I have had to pay people for gas to take us places, call taxis, etc. This has caused such an inconvenience in our life & having two small children at home without a vehicle is a nightmare. I guess my question is what are the next steps if any I should take? Should I just take the $400-$500 & take a loss or should I file a small claims case?