Let's read some more of [link|http://www.revisor.leg.state.mn.us/stats/169/14.html|MN 169.14]:

Subd. 7. Burden of proof. The provisions of this chapter declaring speed limitation shall not be construed to relieve the plaintiff in any civil action from the burden of proving negligence on the part of the defendant as the proximate cause of an accident.


IANAL, but I read that as saying that Allstate would need to prove that your daughter was not driving at an "appropriate reduced speed" and/or prove that she was negligent. (I think appropriate is the operative word there.) IOW, Allstate has to prove that your daughter had any responsibility for the accident. The fact that it happened to her in an intersection does not prove that she didn't obey Subd. 3.

I wouldn't let Allstate get away with this, but you need professional advice about what to do next. Your insurance agent should be able to offer some advice as well (they really should handle the whole thing, IMO).

HTH. Best of luck!

Cheers,
Scott.