The answer to your opening question, C, is that everyone gets sued, everyone denies liability, the insurance company denies cover, and it all gets sorted out on the steps of the court.
There is an important question as to what "demonstrated crosswind limit" actually means. My understanding is that, at least for landing, it is the crosswind that an aircraft has been demonstrated as being able to land without structural failure, if the pilot applies no control inputs to counteract the crosswind in any way. That is, for an aircraft with a demonstrated crosswind limit of, say, 17 knots, the test pilot has landed with the aircraft pointing straight down the runway but moving 'sideways' at 17 knots, and the undercarriage (and related airframe parts) have withstood the consequential stresses.
Like the good FTDK, I've landed a few aircraft in crosswinds far in excess of the stated crosswind limit. Touch wood I've not had to have a subsequent conversation with my insurer.