The settlement is not taxable if it just restores her to where she would have been if the RV hadn't been a lemon. If the settlement gives her more than she lost, the remaining "profit" is taxable.
As the other responders expressed - sometimes the rewards and settlements from lawsuits are taxable, and sometimes they are not. A tax professional such as an Enrolled Agent or CPA can give the best advice.
If your friend simply received money to fix her vehicle or for medical bills - that may not be taxable. If she received other money, such as punitive damages, interest or other funds for being inconvenienced, those may very well be taxable.
Generally, a "recovery" is not taxable, since you are simply restoring/replacing damages. Medical settlements, for instance - to pay medical bills, are not usually taxable, nor are those for injury, sickness. Wrongful death lawsuits are generally not taxable.
The "gray" area is usually with "emotional distress" and "pain and suffering" lawsuits. The parts of the suit that are medically related and used for medical treatments are not taxable, while parts that are for non-performance or inconvenience are taxable. If you receive a 1099 from the insurance company that lists the entire amount - you might consider writing to them and asking for a breakdown. If they do not respond or won't work with you - be extremely careful in keeping track of all medical related expenses for tax time.
Note that a recovery of lost wages is taxable. So are punitive damages, trespass/interference with business, breach of contract, inconvenience, pension settlements, and even unlawful discrimination!
(Note though, there are special rules regarding lawyers fees in the case of unlawful discrimination.. that is the one time lawyers fees may be a deduction/adjustment. Normally, you pay taxes on the lawyer's fee amount too!)
It is income, yes.
As always is best to ask an attorney that practices and knows the laws and statutes of that , city,state,county or country.
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