I believe you posted a more detailed version of this question as well, correct? If so, first, yes the bank can continue to charge you interest until the full loan amount is paid off. But what I find interesting is the issue youre having with the gap coverage. The gap coverage should pay the difference between what you get for the total loss and the balance left on your car loan. Is the gap insurer refusing to pay that amount? Are they unreasonably delaying? - it sounds like they are, and that's why youre being charged this interest. But depending on the terms of the gap coverage, I would think that the gap insurer is also on the hook for the interest charged too - since it's all part of the loan balance. It's possible the gap insurance contract states that so you should review the contract or have an attorney do so for you.
This response is not to be considered legal advice by anyone. This communication, alone, does not create an attorney-client privilege. Unless you have executed a fee agreement with the attorney, that is related to the subject matter contained in this communication, you are advised not to rely on this communication to make any decisions whatsoever or to create an attorney-client relationship. No attorney-client relationship shall exist with this attorney without a fee agreement executed by you and the attorney.