Man, that sucks.
I used to live in Michigan, and had a somewhat similar thing happen when I was driving an antique station wagon of mine. I was going down a road, when suddenly there was this huge, deep hole in the pavement--right around a curve. I had no time to stop, and I tried swerving, but only suceeded in partially avoiding it--one of my front tires still went into the hole, and I heard a loud scraping. I pulled over, and my shock absorber had its 2 claws at the bottom bent and was dangling loose.
I backed up a ways, and saw that there was one very small warning sign off to the side of the road, maybe 50 feet before the hole (this was in a 50mph zone and there was no way anyone could adjust that fast), and the sign was tilted away from oncoming traffic a bit as it had been blown some by a thunderstorm that had gone through a few days before, and had not been corrected.
I tried calling around and complaining, but kept getting bounced around. No one wanted to claim responsibility. Finally I ended up in some County Construction office who said that since there was a sign it was "my fault". By the time I went out that way again, they had put up a sign much clearer, so I could no longer point to how the "sign" condition was.
Ticked me off. At least it was cheap to fix though--in your case I recommend what the previous poster said, and contacting a lawyer.
