Your stepfather should let the insurance company know that if they don't give him the $500, he will sue the other driver for that in small claims court. He should be very careful not to sign anything from the insurance company that gives up his right to do that.
That should get the money moving. If your stepfather actually files that lawsuit, the insurance company will have to defend it, and they'll have to pay a lawyer to do that -- and then, when the lawsuit is over, they'll have to pay the $500 anyway.