I really agree that it sucks for you with what happened, but I don't think it has cause any damage to the frame. The tear happened in an added support bracket for the rear way bar and already had a large hole in it for maybe a lift point or drainage. I would tend to agree with the first shop and just flatten it out and add some rust preventive paint or something. I wouldn't want to open up a can of worms in a claim that may cost you on the resale value.