Your dad-in-law getting insurance in his name has nothing to do with your debt to the lender. The vehicle was reprocessed and auctioned. You need to find out what the proceeds of the auction was. You are likely responsible for the difference of the loan balance minus the auction proceeds. The lender can sue you for the difference if it is significant.
I'm not sure what all liability means in your post. Is it liability for payment of the loan or liability should the vehicle be damaged or involved in an accident.
Either way, unless your dad-in-law is willing to just pay what is owed, you will likely have to sue him to enforce your contract with him.

