A: Dear Parent:
This is a very painful story, from many perspectives. The most important thing is that your daughter is OK, of course, but the emotional effects on you (and perhaps also on your husband and his mother also) can be long-lasting.
You are entitled to be psychologically shaken by this experience and you cannot pretend that it has not had significant impact on you. I think you might also bear in mind that trying to knit the family back together would be a worthy goal--for your daughter's sake eventually, if not for your own.
You should of course make some sort of evaluation of your mother-in-law's judgment. Perhaps the accident could not have been anticipated by anyone. It is possible however that this episode is part of a pattern of poor judgment on her part. You should make a decision about this in partnership with your husband, and plan accordingly. Grandma can be included in family relationships even if her judgment is not the best--but a wise evaluation of her capacities may be necessary if you are depending upon her for child care or other serious responsibilities.
On the other hand, perhaps your mother-in-law is really a victim of chance here, and is fundamentally a wise and sensible person. This is a perspective that you and your husband should discuss at some length together. If you don't seem to be making progress together as a couple working together on this issue, perhaps seeking the outside help of a family doctor, counselor, or member of the clergy would be constructive in getting "beyond" this event.
Keeping these thoughts inside and trying to "pretend" that everything is OK when you are actually quite upset--this is likely to backfire over time. Your daughter needs you to have peace of mind, and it is important that you resolve this crisis for her sake too.