Ask your dealer if is it is possible the ECU vent pipe became loose and interfered with the serpentine belt. The timimg belt is only protected by a fibre cover that looks and feels like cardboard. When the ECU vent interferes with the serpentine belt, plastic shards are thrown into the timing belt cover, damaging the timing belt. Since the S80 inline 6 is an interference engine, the pistons strike the valves, causing engine damage that typically costs $3000 to $4000 to repair. My local dealer is a large dealer, and told me they see one S80 per month (!) with this damage. They advise customers to file a claim under collision insurance, as the loose vent pipe is often caused by the soft lower engine cover coming into contact with a parking curb. They are willing to substantiate the customer's insurance claim.

I will send you a photo of the ECU vent pipe on my '01 S80 before I relocated it permanently away from the serpentine belt. Then you can check to see if yours is intact and secure. Do you have any recollection of coming near any parking curbs recently (the kind you drive up to until your front tires contact it)?

The $12,000 estimate seems hard to beleve. The typical $3000 cylinder head replacement associated with this scenario takes several days to complete (I've seen one underway at my dealer - it is a BIG job). I can't imagine how $12K worth of damage could occur. Even rebuilding the entire engine should not cost $12,000.

By the way, if you visit the NHSTA.gov (U.S. National Highway Safety Transporation Authority)web site, you can find several complaints there filed by S80 owners, desribing the identical scenario.