Screen in the ipad 2 is not working but not warranty because of scratches in the back?

I recently bought an Ipad 2 with apple care, suddenly few days ago the screen stopped working. I reset, restored everything with no success.
After speaking with the customer support over the phone several times (almost 100$ in phone bill!!!) they told me that I could not substitute the product within the due warranty because of some scratches in the back of the devices.
Although they realized that the scratches have nothing to do with the screen issue, they said that these scratches are categorized as "accidental damages" and therefore the warranty doesn't cover that!
I tried to explain that I don't care if my Ipad as some scratches and i don't want that to be covered, I only want the screen to be working and this is an obvious problem of manifacturing!
Bottom line they are now asking 500$ in order to change my 3 weeks old IPAD 2 malfunctioning only because the external part has got some scratches!
Is this standard?

Hey Baelt,
Thanks for the question. I understand that you are experiencing issues with the multi-touch display on your iPad 2. The following resource outlines troubleshooting steps for this symptom:
iPhone, iPad, iPod touch: Troubleshooting touchscreen response
http://support.apple.com/kb/ts1827
Restart your device
Hold the On/Off button until "slider to power off" appears. Slide to power off your device. When it is off, press the On/Off button to turn it back on.
If you can't restart your device, reset it by pressing and holding the Sleep/Wake button and the Home button at the same time for at least ten seconds, until the Apple logo appears.
Clean the screen with a soft, slightly damp, lint-free cloth.
Avoid using the device while wearing gloves, with wet hands, or immediately after applying hand lotion.
If you have a protective case, or if you are using a plastic sheet or film on the display, try removing them and testing the device without it.
If the steps above don't resolve your issue, please schedule a service appointment with an Apple Retail Store for evaluation. If an Apple Retail store is not an option, contact Apple to find out your best service option or see the Service FAQ for your product.
Thanks,
Matt M.

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Screen in the ipad 2 is not working but not warranty because of scratches in the back?

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