You say it's a 300E, so I am assuming it's a 103 engine. They don't really have a wiring harness issue, it's the 320E/E320 with the 104 motor that have wiring issues.
I am sure the insurance Co is going to disregard this totally if it didn't come out of your own pocket, and even if it did they spent WAY too much to replace a head gasket, in alot of cases maybe even close to what the cars value is. If this is really what they spent, they are probably trying to actually HIDE the info from you, because something very bad happened if they charged $7000 to replace a head gasket.
The insurance Co works off of things like Kelly Blue Book to determine value if it is totalled.
Gilly
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