Auto Insurance Claims: Bad repairs, kelly blue book, prince william county

Question
I was advised to do $2,640 worth of repairs by Merchants of Tire Kingdom.  One of those advisements was to fix an oil leak which lead to them not doing the job properly and seizing the engine.  They but a claim in with their insurance company and instructed me to have the vehicle towed to a dealer of my choice for a diagnostic and a claim adjuster to inspect the vehicle.  Well it was deemed totaled.  The insurance company offered me $4100 if they can tow the car and take possession or $3805 if I want to keep.  I live in the state of Virginia in Prince William County.  I wanted know if this was fair because Kelly Blue $4745 and who owes me the $2,640 for repairs

Answer
As far as what your car is worth, the Kelly Blue book is meaningless, especially if you're looking at the "Suggested Retail Value".   If you'll read what Kelly says about that value, you'll see that it is only an asking price on a fully reconditioned vehicle sitting on a dealer lot, often with a warranty.  You will also see a private party value which is what you'd expect to get if you sold your car.  The insurance company likely uses a different valuation approach which is to locate every car like yours that has sold in recent months or is currently on the market.  The figure is based on the selling prices, not the asking prices.  Wouldn't you say that this is fair?  


Now as far as you retaining the salvage, just understand that the car will always be branded on the title as such so even if you repair it and jump through the state's legal hoops,  a rebuild salvage vehicle will never be worth more than 50% of its normal value.  
I'd consider this carefully and find out what is involved in VA for you to put the car back on the road legally.

Now, the repair bill.
There two ways that you can look at this.  
If you had spent $2,640 on the repairs and nothing had gone wrong, you would have a properly functioning car.  Could you have sold it for $2,640 more than it's normal value?  Absolutely not.
If you ran into a phone pole the next day, the car would be totaled and you would receive it's actual cash value.
Would you get the $2,640 back?  Yes and no.  
I believe that the insurance company needs to treat this claim just as they would a collision and give you some type of upward adjustment on the vehicle value due to the recent repairs.  It will not likely be dollar for dollar but will be pro-rated based on the age and mileage on the vehicle. The reason for this is you have to think about what a vehicle would be worth if it's not repaired.  
A vehicle needing those repairs would bring considerably less than its normal value, but the insurance company is paying you the full value.  
There are alot of gray areas here.  The purpose of insurance is to put you back where you were before the "event".  Before the failed repair ruined your engine, you had a car worth $4,100 that you had just spent $2,640 on.  Had it not been for the "event", you never would have seen that $2,640 nor was the value of your vehicle increased by that amount.  Had the repairs not been done and you had tried to sell the car as it, you may have only recieved, say $1800 for it, who knows.

I'm surprised that they are totaling a $4,100 car over an engine as most cars in that price range are old enough that there are plenty of used, $900 engines on the market.
Did they look into a used engine?

If I were in your situation, I would find out first if the shop is going to reimburse any of the repair charges to you.
If not, then I'd ask the insurance company to take them into account on the value offer.  

By the way, what kind of car is this?