What Volvo calls an "IAT" (intake air temp) sensor is what was formerly referred to as an "ECT" (engine coolant temp) sensor. Yes, it sits in the head directly below the thermostat housing. Yes, it would have alerted you to an overheating problem, thus allowing you the time to stop the engine prior to causing irreversible damage. No, it does not come with a new head. Yes, it would have been compromised greatly by the first overheating, and should have been replaced. The part number in question is 9186486. If this number isn't on your repair order, it wasn't replaced.

As an independent repair shop, I still believe the fault lies with the dealer. If the hose were at fault, it had to have felt "squishy" when buttoning up the job. If the fault actually lies in the block not being true, the headgasket would have blown, and the weakest link would have failed, spewing coolant everywhere (in this case, the turbo hose). The block should have been thoroughly checked, considering, it too, is made of that very malleable metal we call aluminum. Unfortunately, there is no way to tell which came first

The dealership most likely has insurance to cover mishaps like this. Hell, I have insurance to cover mishaps like this. I'd never use it, because I would rather absorb the cost than have my rates go up, but the fact remains...if one of my guys messed up and didn't catch the weakest link...he'd be eating the labor, and I'd be eating the part. It's a small price to pay for a sterling reputation. You should probably ask them what price they would put on their reputation, and call an attorney!

Chris