(Excerpts from the U.S. AppleCare+ Terms and Conditions.
Bolding is added for emphasis and clarity. For complete text, and Terms and Conditions for other countries, see:
http://www.apple.com/legal/sales-support/applecare/applecareplusforiphone.html
3.2 Accidental Damage from Handling
...
ADH coverage only applies to an operational or mechanical failure caused by an accident from handling that is the result of an unexpected and unintentional external event (e.g., drops and liquid contact) that arises from your normal daily usage of the Covered iPhone as intended for such Covered iPhone.
ADH coverage does not include (a) protection against normal wear and tear, theft, misplacement, reckless, abusive, willful or intentional conduct associated with handling and use of the Covered iPhone, (b) protection against any other act or result not covered by the Plan, as described in Section 4.2 below, or (c) any resultant damage to the Covered iPhone that arises from one or more conditions described in Section 3.2(a) or (b)....
4.2 Hardware Coverage and ADH Coverage.
...
(ii)The Plan does not apply to damage caused by (a) a product that is not the Covered iPhone,
(b) abuse, misuse, fire, earthquake or other external causes except as described in section 3.2 above, (c) operating the Covered iPhone outside the permitted or intended uses described by the manufacturer, or (d) service (including upgrades and expansions) if such was performed by anyone who is not a representative of Apple or an Apple Authorized Service Provider (AASP).
(iii) The Plan does not apply to an iPhone with a serial number that has been altered, defaced or removed, or has been modified to alter its functionality or capability without the written permission of the manufacturer.
(iv) The Plan does not apply to a Covered iPhone that has been lost or stolen. This Plan only covers a Covered iPhone that is returned to Apple in its entirety.
(v) The Plan does not apply to cosmetic damage to the Covered iPhone, including but not limited to scratches and dents, that do not otherwise affect the functionality of the Covered iPhone.
(vi) The Plan does not apply to preventative maintenance on the Covered iPhone;
(vii) The Plan does not apply to defects caused by normal wear and tear or which is otherwise due to normal aging of the product....