Apple denies replacement due to apparant water damage, wetness indicator is white, iphone 5 has been searching for a network for 5 days and its never got wet

So my iphone is about 5 months old, over the last week it has been searching for a network signal. Yesterday i blew inside the sim tray to as i thought there was something stuckin there (stupid i know) but today apple denied replacement due to water damage. theres no water damage and the wet indicator is white. any advice on what i can do?? as i know it hasnt been submerged in water or exposed to water the phone was broken before i blew in it...the phne works fine its just not picking up a network

Take it back to the Apple store and ask for an explanation as to why they believe there is water damage.  They should be able to show a water sensor that has been affected.
If still unhappy with the explanation, ask for a manager.
IF that does not get a satisfactory resolution, contact Apple customer care.

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