By Jon Hood
ConsumerAffairs.com

April 17, 2010
A class action lawsuit filed Thursday says that Apple turns the tables on consumers whose iPhones suddenly stop working, blaming the problem on owner-inflicted water damage and forcing customers to settle for a discounted phone.

The suit, filed in the U.S. District Court for the Northern District of California, says that Apple uses an unreliable Liquid Submersion Indicator to deny warranty coverage out of hand, despite the existence of a more accurate indicator built right into the phone.

Apple's standard one-year warranty -- included in the purchase price of a new iPhone -- purportedly covers defects in materials and workmanship under normal use. When presented with a defective phone, Apple is required to repair the phone at no charge, replace it with a new phone, or refund the purchase price to the consumer.

The company offers an extended two-year warranty -- also known as the AppleCare Protection Plan -- for an extra $69.

As with most warranties, Apple's lists a host of conditions not covered by the agreement, including liquid spill or submersion.

Those exceptions provide a convenient excuse for a manufacturer to dishonor its warranty obligations, as most consumers who have ever tried to return something can attest. But Apple has taken the warranty bait-and-switch game to a whole new level, according to the plaintiffs.

The iPhone's headphone jacks contain a Liquid Submersion Indicator, designed to determine whether liquid has entered the device. The complaint quotes an Apple document as explaining that the Liquid Submersion Indicator is not triggered by heat or humidity that is within the product's environmental requirements described by Apple, and that corrosion, if evident may cause the device to not work properly.

More reliable technology available

According to the suit, Apple's policy requires employees to deny warranty coverage to any iPhone whose Liquid Submersion Indicator has been activated. But the plaintiffs contend that, given the corrosion disclaimer quoted above, the indicators can't be relied on with any reasonable degree of certainty to determine whether a phone has actually been damaged by liquid.

Rather, the suit contends, the indicators could be activated by cold weather and humidity that are within Apple's technical specifications, as well as other types of moisture that should not cause damage in any event -- such as a palm that becomes sweaty after a work-out.

Moreover, according to the complaint, iPhones are equipped with more-reliable internal Liquid Submersion Indicators, whose purpose is to assist Apple service personnel in verifying whether those devices have actually been damaged due to liquid spills or submersion. But, according to the plaintiffs, Apple's policy is to deny warranty coverage for any phone whose external indicators have been activated, without even checking to see if the internal indicators have likewise been triggered.

The complaint alleges that, in May 2009, Apple began offering out of warranty service to placate the large number of consumers who were denied warranty coverage for their broken iPhones. Under that program, consumers are offered a new phone for the reduced price of $199, and are not required to extend their wireless contracts. However, the plaintiffs say that under the out-of-warranty service option, consumers are required to relinquish their current iPhone to Apple without compensation.

Making matters worse, AT&T -- currently the sole wireless provider selling the iPhone -- refuses to offer insurance for the device. According to AT&T's website, insurance costs a mere $4.99 per month and covers phones that are lost [or] stolen, or that have fallen victim to liquid damage [or] mechanical or electrical failure after the manufacturer's warranty period has expired. Although such insurance would obviously cover the phones at issue here, AT&T asserts without explanation that Wireless Phone Insurance is not available for and does not apply to ... Apple iPhone (all models).

Constance of Stockton, CA wrote to ConsumerAffairs.com in February with the exact problem described in the lawsuit:

I purchased an Iphone two years ago. It stopped working and when I took it to the Apple store in Greensboro, North Carolina, I was told that it had water damage and I would have to pay 199 for a new one. I did not appreciate the customer service because after an argument with the customer service consultant, they informed me I was eligible for an upgrade which would cost me only 99. I purchase the new phone and after 6 weeks I had problems charging up my phone.

The suit alleges, among other things, breach of warranty, fraud, unjust enrichment, and violations of the Song-Beverly Consumer Warranty Act. The class is being represented by Fazio Micheletti LLP, a San Ramon-based law firm.