Insurance companies do not necessarily need to ask if they can repair your vehicle with used parts but they usually are required to inform you if used or non-factory parts are used. Most state laws allow you to turn down the used part if you want to pay the difference between that part and a new part.

For example in Florida the FL Department of Financial Services states that the parts used for repairs do not necessarily have to be original equipment manufacturer (OEM) parts, but should be of like kind and quality as the parts being replaced. Ask your company about what guarantees will be given on these parts. Florida law requires the parts to be of same fit, quality and performance.

To find out what your state laws require of insurance companies regarding this situation check with your insurance agent and/or your state's insurance regulatory body.

As for the bad transmission, hopefully there was a warranty given on the repair part so that it may be repaired or replaced without costing you. The insurance company that paid for the repair should also be notified so that they are aware of the situation.