The line has to be drawn. If Apple replaces a phone for every person in a similar situation, they are putting themselves in a no-win situation (long term).
We all like to read stories of Apple going the extra mile for someone. That is one of the things I like about Apple. However, I realize that such action is always at the discretion of Apple. And when it comes to the legalities of things like AppleCare, Apple is not obligated at any time, to provide service that is outside the bounds of said agreement. Should Apple give service outside the bounds of its own legal agreement with a customer, such action does not prevent Apple from strictly enforcing the terms with the same customer in the future, or anyone else.
One of the problems is that too many people around here have embraced the entitlement mindset. And when a situation doesn't go above and beyond, Apple bashing occurs. Apple fails customers at times. And when that happens, I have no problem with someone shedding light on Apple's failure. In this case, Apple didn't fail the customer. Apple didn't go above and beyond the terms of the agreement as the OP expected.
I also think many members here don't take the time to think about situations from a business point of view. If they did, they wouldn't be so quick to embrace the mindset that even though the business has a legal agreement to protect itself and the customer, it should always take action that is inconsistent with the agreement. That mindset sounds good to many around here because it makes for good personal relations. And for some, such actions are used as some kind of validation for buying a very expensive device. A business that acts in the manner that many here expect all the time, wouldn't be in business very long, especially with the success that Apple has had over the years.