I am not trying to hijack this thread, but I will give Rockter a brief answer to his question. Sorry.
The engine has now been rebuilt, along with some additional "maintenance" items like a new exhaust elbow, rebuilding of the injectors, saildrive hull seal replaced, etc. It seems to be running well (so far only a few hours on it).
I intend to do a full update after everything is settled, but here is the short version so far. My hull and machinery insurance will provide "some coverage" for this failure and the invoice is in their hands now (minus of course any work not directly related to the failure). I am awaiting their response. I contacted Volvo Canada again, and they are a little more receptive than before the engineer's report. After much back and forth, they have verbally (will not put anything in writing) offered to cover the difference between what insurance pays and what I am "out of pocket" (for the breakdown). We will see, I still don't (completely) trust them.
I will update either on the old thread or create a new one once this is settled. I want to be fair to all parties and to insure that interested people are fully informed.