Best way to handle this?....

If the photographer is making money on the job yes. If they just want to use it as an example piece of your work to help upsell work that will actually come your way no.

You need to ask this photographer for more information on the intended usage.

 

This is no different than you contacting the photographer to use one of her photographs on a project for one of your customers, and she's not going to give it to you. But she will inquire about the intended use and based on that will sell you the rights to use it.

You should do the same.

 

Yes, but you'll probably upset them.
If you want to avoid that in the future make clear your policy on artwork ownership before designing anything.

 

I would charge regardless, any time a file leaves your computer and goes into someone's hands other than your own ... it's a possibility of less work in the future from the same customer. Only time I don't charge is when a customer buys a logo or what not and pays for exclusive rights to the art I created, they get the file anyways with that. If they need it replaced, that is something else entirely.