How do we proceed with mediation or court?

I co-signed my college age daughter's rental. They had a sewage flood in it through no fault of their own. The property manager does not think that it requires professional sanitizing and cleaning. We have over communicated with him on the severity of the situation, that they have not been able to live there, they have since moved out and that we feel this is a solid reason for breaking the lease, as well as having our security deposit returned to us. He continues to stall and is now telling us that he won't come to a decision until after our renters insurance completes our claim. I would like to come to an agreement with him and walk away feeling like he cannot take any actions against us afterwards. Looking for advice on what we can do and how to handle it. Mediation?