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Ask to speak to the store manager if you haven't yet? I have no personal experience with Apple Care + but I have plenty of experience claiming under the consumer right law, they try to pretend it's my fault everytime. Also, I assume you know where the water damage indicators are on the iphones? If it's showing white then I don't think they have a lot to argue for, after all, it's their idea to have those little stickers hidden in the phones anyway.
ExTra
Smashed my iphone screen, finally, so took it in to repair (apple care +). They're claiming it's water damaged. It may well be, but not properly, only from a steamy bathroom or sweaty fingers. That phone is only 3 weeks old, as it was a new replacement for one that was defective.
The phone works perfectly fine, any water damage is irrelevant.
Aholes.