Dog bite to neighbor by stray taken in by us.

Found stray dog in our n'hood on 7/4. Attempted to find owners. Dog and I were outside in my front yard playing ball -- no leash. 8 yo nbr kid, who had played with dog before, wanted to throw the ball. He threw ball, dog returned it, jumped up on kid and bit his arm. Went to hospital, got stitches on arm. Animal control was called. Dog was quarantined at my home. AC aided me in finding owners. Dog has been returned. Parents now want $2,000. Am not sure what for. Atty says we are responsible. Do real owners of dog have % of responsibility? Thanks for your help!