You're in luck... Apple extended warranty on series 2 watch batteries for just this reason.I’m out of warranty. You think Apple will replace this for a fee or free ?
I enlarged the photo and cropped the angle, its really difficult to tell from that specific angle if its a partial reflection or damage. Even if it is a chip out of the display and _if_ determines its a swollen battery, I doubt they will use accidental damage against the OP, especially given the extended warranty. If there was more significant damage, then I would see Apple raising the issue.Is that a chip in the screen on the left hand corner?
If so unless the battery is swollen it may be considered accidental damage.
Ultimately the depot will determine the coverage.