Apple Settles iPhone Water Damage Claims For $53M

Apple will pay out an eight-figure sum to settle a class-action lawsuit over iPhone and iPod warranties.
5 Apple iPad 5 Wishes
5 Apple iPad 5 Wishes
(click image for larger view and for slideshow)
Apple has agreed to settle a class-action lawsuit filed in California over its iPhone and iPod warranty practices. The lawsuit concerned water damage and the denial of consumers' warranty claims, for which Apple must now forfeit $53 million.

The plaintiffs alleged that Apple instructed its retail store employees to deny warranty coverage for products that sustained liquid damage. Apple products, including the iPhone and iPod Touch, contain strips of paper inside them that change color when exposed to water. The strips are there to let Apple know when iPhones and iPods have taken a bath (or been dropped into a toilet), which leads to damage that isn't covered by Apple's standard warranty.

The problem, argued the plaintiffs, is that the paper, which was developed by 3M, often changed color when the iPhone or iPod was subject to moisture or humidity during the course of normal use. Apple disagreed with those claims, and denied warranty coverage to all devices it believed to meet the criteria for sustaining water damage. Consumers who were denied warranty coverage over the supposed liquid damage were then on the hook for the full cost of repairing or replacing their iPhone.

[ Apple customer satisfaction sags. Read Apple Slips, Samsung Gains In Satisfaction Rankings. ]

Apple typically warranties its products against manufacturer defect for a period of one year in the U.S., but the warranty does not cover damage -- including submersion in liquids -- inflicted by device owners.

The $53 million will be put into a fund for the approximate 153,000 members of the class who had been denied warranty coverage for this reason. Those involved in the lawsuit are eligible to receive up to $300 in damages from Apple, depending on the iPhone model in question. The lawsuit covers consumers whose iPhone warranty claims were denied before Dec. 31, 2009. That means older devices, including the original iPhone, iPhone 3G and iPhone 3GS are covered, but newer devices, such as the iPhone 4, iPhone 4S and iPhone 5, are not. Details about how the funds will be dispersed or can be claimed have not yet been revealed.

Lawyers for the plaintiffs believed damages would have ranged between $31 million and $147 million had the case gone to a jury. Apple was able to settle for an amount closer to the bottom of that range.

Apple has gotten into trouble over its warranty practices in the past. CEO Tim Cook was forced to apologize to Chinese consumers earlier this year after Apple was accused there of shortchanging people on warranty claims and discriminating against Chinese consumers.