No offense but do you know how it sounds saying that Apple would go to court in order to deny a simple warranty claim. Apple has built an IPx7 waterproof watch. The percentage of water failures is probably going to be well under <.01%.
Refurbish/replacements probably costs Apple <$100. Much easier, less expensive and most important customer relations friendly just to swap it out and move along.
I bet there will not be a single warranty claim denied on the bases of water damage alone.