That doesn't seem too bad to me for three years motoring:

£6995 - (£3100+£2610)=£1285. You have to ignore the excess, that's your choice to reduce the premium.

If your GAP insurers are saying the car's worth £4385 and your motor insurers saying it's £3100 then you can use the GAP insurers valuation to up the motor insurers offer. Of course you didn't accept the motor insurers first valuation, did you?

Sorry to hear about your incident, hopefully no one was hurt (well, other than financially, obviously!)

It's clear that you were under the impression that the Gap paid from whatever the insurance paid to what you paid for the car. As you now know, this is not the case. Now I know this will come over as having a pop, but it's not meant. I'm just trying to help.

1. If the motor insurer paid you £1.00 would you expect the gap to pick up the difference?
2. If you didn't have the Gap would you have contested the insurance valuation?
3. I don't expect you will have read the terms & conditions (no-one does, let's face it) but it will state in there what the Gap pays from
4. But you will also have been given a "KeyFacts" leaflet which lays out the main limitations & exclusions of the policy including that it only pays from market value.
5. The thing is, you can't rely on being told all of the relevent information nor can you rely on remembering all you were told, that is one reason the Financial Services Auth introduced "KeyFacts". It is intended to protect the consumer, but it also protects the seller; & so it should
6. BUT .... if the dealer is saying HE was NOT aware of the terms, then he is clearly at fault & should pay the difference (although a court may say that you were equally at fault for not reading what you were given)
7. Go through the complaints procedure ensuring the dealer is aware you WILL take it to the FSA if you recieve no joy from him

Good luck