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The failure was caused by an overheated ignition coil. When the coil overheated, it transferred excessive heat to the surrounding oil, causing the oil to expand and subsequently leading to the coil failure.

This overheating could have been triggered by the ignition switch left in the "on" position while the engine was not running. If the points just happen to be in the closed position, this would result in a continuous dead short. This sustained electrical draw causes the coil to rapidly overheat. Alternately, the coil itself may have had an internal failure or breakdown in insulation, causing it to draw excessive current and overheat during normal operation.