I had a different experiance with the extended warranty company. My out of pocket was $300 on 2k+ bill.
Sorry to hear of your bad luck. Something doesn't sound right though. I know there are somethings not covered by the warranty, and some that are. Did the people doing the work bill you for misc. crap? The cost of the engine plus the labor to install, should have been covered under warranty. The only way they can weasel out is if they can prove you had a intentional hand in causing the failure. Did you drive it for a period of time with the CEL light on?
Try to sue in small claims court. If they don't show up you automatically win.
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Today's Featured Article - Talk of the Town: The Saga of Grandpa's Tractor - by The following saga is from the Tractor Talk Discussion Forum. Someone. The saga starts with the following message: Hey guys I have a decision to make. I know what you all will probably suggest and it will probably agree with me way down inside, but here it is. I have a picture blown up and framed in my "tractor room" of a Farmall M. It was my Grandpa's tractor, of which whom I never got to meet. He froze to death getting this tractor out of the barn to pull a truck out of the ditch before I was born. Anyway my dad and aunt had to sell it at the auction,
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