That whole water damage voiding the warranty, even from construction faults, has always been weird to me. It would make sense if something was wrong with the phone that obviously could have been caused by water damage, but what if your phone has some other problem?
This past summer, my friend's 3yr old son through her phone in the pool. I don't remember what kind of phone it was other than it being a flip phone. I was in the pool at the time and grabbed it before it sank too far, and she immediately took it home and dried it out. Everything worked fine for the next several months. Then, back around Thanksgiving, the mechanism that help the phone open broke. When she opened it, the thing would just flop back closed. The odds of that issue being caused by water damage are pretty slim, but because the indicator was red, they wouldn't replace her phone free of charge. She put up a big stink but eventually had to pay full price for a new phone. :\