Wouldn’t her insurance company own the car?
Only if she had theft insurance.
How did the new guy who fixed the car up get tags for it.?
If she had been paid off under her comprehensive portion of her policy the insurance company would own the car. However, they still have to offer the vehicle back to the owner.
FYI, I had a car stolen from the repair shop. It was in for a new clutch @ 91m miles. I was paid by the auto repair insurance company for about $1000 more than it was worth. The vehicle was recovered about 3 months later. The insurance company still offered me the vehicle back. I had aready purchased a replacement with the money they had given me. They stated they were required to offer the vehicle back to the origin owner.
Maybe she wasn’t insured for theft, many people aren’t.