It looked like the hose had been rubbing on the oil sell filter housing and had created a hole. Strangely, the hose wasn''t really touching the oil filter housing at that time. I decided to check our online technical information source for a BMW factory technical service bulletin that could shed some light on this problem.Great! There was a bulletin that covered this exact problem and here''s what it described:Some BMW M3 models, produced from September 1995 through June 1996, equipped with the M54, S50, or the S52 engine, may have an upper radiator hose that can come in contact with the oil filter housing only when the engine coolant is at operating temperature. The contact is due to coolant system pressure and expansion of the hose.Checking the clearance between the upper radiator hose and the oil filter housing must be performed when the engine is cold.

It looked like the hose had been rubbing on the oil sell filter housing and had created a hole. Strangely, the hose wasn''t really touching the oil filter housing at that time. I decided to check our online technical information source for a BMW factory technical service bulletin that could shed some light on this problem.Great! There was a bulletin that covered this exact problem and here''s what it described:Some BMW M3 models, produced from September 1995 through June 1996, equipped with the M54, S50, or the S52 engine, may have an upper radiator hose that can come in contact with the oil filter housing only when the engine coolant is at operating temperature. The contact is due to coolant system pressure and expansion of the hose.Checking the clearance between the upper radiator hose and the oil filter housing must be performed when the engine is cold.

Visually inspect the upper radiator hose aur for pressure marks and traces of rubbing at the closest point of contact to the oil filter housing cast boss (see illustration). If traces of rubbing are found, the upper radiator hose must be replaced with the new style hose (See Parts Information).NOTE: A modified hose was used in production from approximately mid-November 1995 through June 1996, which included an extra rubber pad attached to the outside of the hose in the critical area. If traces of rubbing are found on the rubber pad area of this type of hose, it must also be replaced with the new tools style hose. Visually inspect the oil filter housing for any sharp edges or burrs on the casting boss. If a sharp edge or casting burr is found on the boss, it must be removed using sand paper or a fine file.