Thanks, but I think that's what the adjuster was using to argue that they didn't have to replace the seat. It says that by CA law they are required to replace the seat if it was in "in use" at the time of the crash...which it technically wasn't. But it's good info to have =)
And this is where your letter from the car seat manufacturer, plus the NHSTA guidlines come into play. It doesn't matter if a child was in the seat or not. The seat is compromised, and the manufacturer of the seat will back you up. In writing! It's time your SIL calls BS on their line of reasoning. Start moving up the food chain. Supervisor first, then call the corporate office and ask to speak to the office of the President. Also don't hesitate to threaten, and mean it, to move your business elsewhere if they don't replace the seat.
PS... To be honest, I'd still look at other insurance companies irregardless of whether Nationwide replaces the seat or not. I know I wouldn't continue to do business with a company that treated me like they have your SIL.