You may want to confirm with the owner of the car's insurance company that they are not paying for the guardrail damage. Though this may normally fall under the property damage of a liability policy it may be that there are exclusions in the person's policy for things such as this so that a claim for it could be denied.

If the insurance company is not paying for guardrail then it would appear that you could be held responsible for this $700 worth of damage since you were the driver that hit the guardrail and damaged it.

To get more information on liability and if damaged guardrails are normally paid for by an insurance company you can contact PennDOT or whatever Pennsylvania State agency sent the demand letter to get more information on the situation.