Bit of a weird situation.

I broke my phone whilst on holiday and claimed for a repair on travel insurance.

They paid me for the price of a repair but I figured I wasn't under any obligation to go through with it so instead I sent my phone in to a recycling service to get a bit more money.

Now, the recycling service is telling me that they won't pay me and won't give back the phone because checkMEND, a service that checks whether phones are stolen, has an insurance claim logged against the phone. To be clear, the device is not blocked on the report, just a warning against insurance claim.

Insurance are refusing to amend the report. The recyclers are refusing to give me my phone back without an amended report. What the hell am I supposed to do?

Recyclers claim that they "would risk prosecution under The Theft Act or Proceeds Of Crime Act" if they send it back, but essentially they've stolen my phone, which there's clear evidence that I own.

(in England)