What year did the settlement take place? If 2018, please refer to Publication 547 for 2018. Claiming a theft loss in 2018 is not a possibility. But it appears you might be able to offset the 1099 income by the loss, you just can't claim the remainder of the loss.
https://www.irs.gov/pub/irs-pdf/p547.pdf
In my opinion, the $15,000 was stolen in 2015. That would normally be the year you would claim the loss. I agree that since you sued, your loss had not been fully determined since there was the possibility to recover amount(s) of the loss, and the loss was undetermined. However, I think an argument could be made that now you have finalized the loss and that $7,500 could be claimed on an amended 2015 return for a theft loss of the $7,500. If you timely filed 2015, you would have until April 15, 2019 to file an amended return.
Having said that, there is the counter argument that presumably the loss is finalized and should be claimed in the year in which the lawsuit was settled; as that is the time when the actual loss has been determined.
**Disclaimer: Effort has been made to offer correct information; but due to the discussion forum limitations, the poster disclaims any legal responsibility for the accuracy of the poster's response**
