I've been longarming for 6 years . . . this just happened to me for the first time on a customer quilt. I was using a ruler template, my hopping foot hopped onto the template, broke the needle and tore a small hole in the quilt. Needless to say, I was sick. I fixed it and them put fraycheck on that spot so that it won't fray over time. I definately will tell the customer when she picks it up ... thankfully I have done lots and lots of quilts for her, so we have a good relationship.
Stuff happens, we're human. However, I agree that she needs to make it right with you and should have been honest with you about it.