I've never known any insurance pay out for a mechanical failure.

Ask over on talkford.com, as there's quite a few people who have had to swap engines in Mondeo TDCis. It needn't cost as much as has been mentionned, but it's not going to be cheap.

One angle to take is that you go back to the garage you bought it from (presuming it wasn't a private sale) and waggle the Sale of Goods Act under their noses and see what they say.