Dispute on Totaled value of Toyota corolla

My 1997 Toyota Corolla was in an accident recently in the Omaha, NE area (68128) and Progressive (my insurance company) "totaled" the car at $2, 520, which is far less than KBB value. This value supposedly includes all fees & taxes, and is still subject to my $250 deductible. This car has current KBB value of $3700.
We bought this car 2 years back from a local dealer for $4250 and in a months' time we had to spent $1750 for changing the transmission belt. I spent a lot on this car and finally according to Insurance people its valued only $2520.According to claim representative, this was totaled before as well which is an unknown fact to us. We had clean title from dealer and even Car fax didn't show that it was totaled. The surprising thing is that Progressive offered insurance quote based on a clean title. I don't know how would they change their records to double-totaled now when we are at receiving end.
We talked to the local dealer and he is still saying that our car was of clean title. At the same time, Progressive is going to send us report which shows it was salvaged. I do not know where to proceed further. I spent around $6000 on that car (excluding taxes) and the totaled value of $2520 can no way compensate that.
Please let me know how I can proceed further...or which is the best way to get the things cleared...

Thanks!