The person backing out of the driveway is at fault regardless of the legality of parking in that spot. If a child was standing there illegally does that give you the right to hit them? No. A person backing has a greater duty of care.
I would let them know you plan to submit it to your insurance company and she will be the at fault party (unless she can show that your friend slammed the side of her car into the neighbors rear bumper
). That will give her the opportunity to pay it out of pocket if she so chooses, in order to avoid a possible surcharge against her policy.