Costomer won't pay so they want the money from us (the sub-contractor)

I am a Hard surface flooring installer. I work for my father, and he owns his own business. We took out a job from Austin Bluffs Flooring witch was a remodel. The job went off without a hitch, that was until after we left. We got a call later that night saying that one of the supply lines from one of the toilets removed & replaced.
This has never happened to us before. We saw the line and it wasn't broken no one really explained to us how it happened and we, the shop included, were dumbfounded. Anyway there WAS water on the floor and the damage had been done and since we were the last one to touch it we took responsibility. We called our insurance company , they called in the repairmen, we paid the $500 deductible and everything was fixed. The shop told us that the damages pretty much broke even with the money they owed us so we weren't going to get paid.
We thought that was the end of it all until Austin Bluffs Flooring went to collect from the home owner. The salesmen offered to take $250 off the $2300 bill for the trouble and the homeowner said no... and then he proceeded to write him a check that was $870 short. He said that’s what the shop owed him because he had to stay home and supervise the repairs.
The home owner refused to pay so Austin Bluffs Flooring decided that it was up to us to make up the difference. This happened about 5 weeks ago (Sep.25) and the owner of Austin Bluffs Flooring is threatening to take us to court by Oct 1st.
None of this evens out for me. We ate the entire job ($1300 and 3 days) we paid the deductible ($500) we were cooperative the whole time, and now they want us to pay the rest of what homeowner refuses to ($870).

I don’t know what to do or what to expect. It seems wrong to me but I have no idea what Austin Bluffs Floorings legal position.

If anybody can give me any information I would greatly appreciate it.

-Jr.

The man who owns the shop served my father with court papers the other day. The customer still wont pay so he still thinks my father owes him the money because it was a "forced loss". I can't find any legal definition of this... can somebody help me out.
-Jr.

P.S. I still have no idea what our legal stand point is...

I have no idea what this means:

"The job went off without a hitch, that was until after we left. We got a call later that night saying that one of the supply lines from one of the toilets removed & replaced."

On of the toilets was removed and replaced? This would mean, then, that you were NOT the last person in the home.

You need to take Austin Bluffs to Small Claims Court for what they owe you. The insurance paid a claim, and they accepted it, so if they were out more than the claim filed was for that is their problem now.
Most counties have Small Claims Court Advisors that will walk you through it, but if not, you can go to their web sites to get information. Stop taking the blame if you are not positive you are to blame. Austin Bluffs needs to file a lien on the owner's house, as the owner has no right to hold their draw, but that is between them.
We were in this position once, and the judge ruled for us.

Its not that simple. Even if it WASN'T their fault, they accepted responsibility. This is why I asked for clarification of his comments.

I re-read my original post and I did make a mistake. What I meant to say was we got a call later that night saying that a supply line from one of the toilets we removed & replaced had broken. When they showed us the supply line it wasn't broken at all. The supply line failed in a way that simply couldn't be explained to us. We were not the last ones in the house but apparently the last to touch the toilet so we were held responsible, and we did our best to resolve to situation in most professional way.


PS. I appreciate everybody's help