How do you feel about VZWs replacement policy?

Personally, I never had issues till last week. I called, talked to a rep, had problems with 4G, spent 30+ mins troubleshooting, he tells me that they'll replace it. Asks me if there's any damage; I say yes to the top corner, scratch from hitting the ground. Sends me a refurb (which is fine) and I send mine in. I get an email, "Your returned device has physical damage that was not caused by electrical or mechanical malfunction and is therefore not covered by the manufacturer's warranty." Great. The rep tells me there's "evidence of corrosion which supports water damage." and has a picture of the USB port with a big red arrow. Wonderful. I ask him what options I have? Long story short, none. They're keeping my phone and going to charge me $300 for the refurb.
How in the world is this fair? There's no way to know whether or not a phone is going to be replaced until I send it in and it's inspected. Even if you took it to a store, they're not qualified to speak on behalf of VZW that a phone will or will not be replaced. Am I off base here? Why do I not have ANY options? Why couldn't I have been contacted to say hey we're not going to warranty replace your phone, do you want it back or pay the charge? It's total crap.

Did you ever get this issue resolved? I'm having a very similar issue which I'm trying to get it resolved last several weeks and no luck.

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