So sorry for the loss of your flock. I hope your neighbor pays up--seems like he has good intentions.......that's good news! Maybe it was just an accident that his dog got out.....
My neighbors both have dogs....one neigbor has one dog chained to the dog house, and I know if he got loose, that would not be on purpose....he's never loose. And the other neighbor has a little dog that is loose all the time. I'm sure he could damage a chicken, but he's on the small side, and he doesn't come over--he's real old too.
My chickens free range during the day, and they mostly stay in our backyard, which is surrounded by woods--we've got a little over 6 acres, but if one of my chickens strays over to the neighbors and gets attacked, it would be my loss, since I let them loose. They are just happier when they can forage around....instead of pacing in their run. I figure it's a good, happy life for them.
Good to hear a neighbor taking responsibility! Hope you guys will still be friendly!