Roughly 3 Grand in plumbing damge. Possibly neighbor's fault

I seriously doubt you're going to be able to hold the NEIGHBOR accountable for YOUR plumbing problem.

Yes, this claim will eliminate your loss free credit, and if you live in a state where they can cancel you for 2 claims, this will be one of them.

When it comes to premium increases due to claims, most insurance companies do not factor in dollar amounts. So your rate will go up the same regardless if its a $20,000, or a $2 claim.

Some companies will "forgive" your first claim. Ask your agent if you qualify for something like that. Otherwise, it will be somewhere in the ballpark of a 30% increase for the next few yrs.

If you believe that your neighbor is at fault and you can find sufficent evidence, than you may want to sue for the damage or have your neighbor file an insurance claim.