Yeah, that's sad...and...she KNOWS it was her dog. I too, would have said...ummm nope these two are fully trained and I have notice yours has been taken out once in like 5 hours. But keep in mind, it's never the pups fault, it's the owners for not being diligent enough. Would've thrown the embarrassment right back at her.
Sorry, that's just me...never been good at holding my tongue.
You did right....don't give it anymore thought...she REALLY does know.