They will have to pay out and then seek costs from you, so yes they will be able to challenge it.
If they refuse to do so, you can contest this. They may then withdraw indemnity and as such you would be liable for the proceedings and then could challenge it in any event.
The difficulty as you can imagine is that you broke the terms of the insurance. You allowed someone to drive when they were not covered, so I imagine they will refuse indemnity.
But you can instruct them to challenge and indeed they can. In any event if they withdraw indemnity you can challenge it.
If you want me to look at the evidence, I can consider this but depending on how much there is, it would be additional cost.
They would have to show (if it went to Court) that the fluid was fluid and not a stain. That it was also transmission fluid. So yes, I think its worth pursuing and you (or insurance company) can put them on notice this is a fraudulent claim
Can I clarify anything for you about this today please?