Your mother in law can file a suit against the city government. However, such right is regulated by the law on statute of limitations. You need to check first your states law on statute of limitation to determine if it is still within the prescriptive period.
He has a legal standing to sue. Applicable laws strictly provides that dog owners are liable to injury caused by their pets whether such dog has no history of violence. It is the responsibility of pet owners to see to it that their pets will not cause any harm to anybody.
You can still file a claim with the insurance.The law on statute of limitations of a case involving injuries to minors does not begin to run until he reaches the age of 18.
However, for further clarification regarding to your other concerns you must consult a lawyer to discuss with you other...